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Seanad Éireann debate -
Friday, 25 Mar 1988

Vol. 119 No. 4

Social Welfare Bill, 1988: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

I am very happy to be introducing this Bill which not only provides for the social welfare increases announced in the budget but also contains other major improvements in the social welfare system. The Bill is in fact the most comprehensive price of social welfare legislation since the early seventies.

The most fundamental change which is being provided for is the extension of social insurance to the self-employed. This is the first time since 1974 that social insurance cover has been extended and this extension will bring within the system 20 per cent of the workforce who up to now have been excluded.

The general increase in social welfare payments confirms the Government's commitment to improving the incomes of the less well-off in our society. In addition, however, the Bill provides for additional increases for those on the lowest payments and for a streamlining of rates of child dependant increases. The Bill also provides for a number of other improvements designed to help particular categories of persons in need.

The special concern Fianna Fáil Governments have always had for our older citizens is shown by the introduction of a pre-retirement scheme for the older long term unemployed. There is provision also to deal with the longstanding anomaly in the old age pensions scheme which affected pensioners with gaps in their insurance records as a result of the operation of income limits for social insurance prior to 1974.

Although this morning's newspapers referred to a rate of 1.9 per cent, happily the rate of inflation this year is expected to be 2.5 per cent, and the general increase of 3 per cent in social welfare weekly payments which is provided in this Bill will more than protect the real value of those payments. In addition however, much higher increases are being given to those on the lowest payments, namely unemployment assistance and supplementary welfare allowance.

There are three main improvements in rates. These are: (1) a general increase of 3 per cent in widow's and old age pensions, unemployment and disability benefit and other weekly payments; (2) an 11 per cent increase in the personal rates of unemployment assistance and supplementary welfare allowance and a 6 per cent increase in the rates for their dependent children; and (3) a streamlining of rates for child dependants involving increases for larger families. In future there will be two different rates per scheme. In general there are four at present.

A family with three children in receipt of unemployment benefit will receive an increase of £3.10 per week giving them a new rate of £102.30 per week. A couple on retirement or old age pension will receive an increase of £3 per week giving them a new rate of £99.20 per week. A widow with three children in receipt of a contributory pension will get an increase of £2.80 per week giving her a new rate of £93.30 per week. The cost of this 3 per cent across-the-board increase is £67 million in a full year.

A particular feature of the Bill is the provision being made for special additional increases for people on the lowest social welfare payments where the personal rates are being increased by 11 per cent. The Commission on Social Welfare and others have referred to the low level of certain payments and this is the first time that special attention has been given in this way to people on the lowest levels. The effect of the 11 per cent increase in these cases will be that, for example, the personal long term rate of unemployment assistance in urban areas will now be £42 per week, i.e. an increase of £4.20 per week.

A married couple with three children will get £6.70 extra per week bringing their total to £98.80. Other personal short term and long term rates are being increased pro rata.

At present, there are 36 different rates of increases for child dependants overall and within each scheme there are four different rates. A major step is being taken in this Bill on streamlining these various rates. Instead of four different rates there will be two for each scheme. The new rate for the first two children will be the average of the two rates with the 3 per cent increase applied. All families will receive at least a 3 per cent increase in their rate. The rate for the sixth and subsequent child will be increased to that for the third to fifth child. This will mean very significant increases in the rates for these larger families, at a cost of £3 million in a full year.

I referred to the 11 per cent increase in personal rates of payment for unemployment assistance and supplementary welfare recipients. As far as the child dependant increases of these payments are concerned a 6 per cent increase in the rates for children is being given. This will provide a significant improvement in the position of families on the lowest payments when taken with the 11 per cent increase in personal rates.

For example, a family with two children in receipt of unemployment assistance at the long term urban rate will receive an increase of £6.20 per week. Their present rate of £84.20 per week will, therefore, rise to £90.40 from July next.

A family with six children in receipt of unemployment assistance at the long term urban rate will receive an increase of £9.70 per week, giving a new rate of £124. The total cost of the increases for child dependants is £9.7 million in a full year.

The overall social welfare package of improvements in payments will cost an estimated £44.8 million, including health allowances, this year and some £101 million in a full year.

The earnings ceiling up to which social insurance contributions are payable will be raised from £15,500 to £16,200, with effect from 6 April 1988. There will be a small increase in the employers' occupational injuries fund contribution from 0.43 per cent to 0.5 per cent from 6 April. This is necessary to ensure the solvency of the fund which, under statute, is funded entirely by employers. At the average industrial earnings, the extra cost per year per employee will be about £7.

Section 8 of the Bill provides for an increase from £62 to £66 in the amount of weekly earnings disregarded in calculating the rate of pay-related benefit. This change will affect only new claims from 4 April.

The income limits for family income supplement are being increased in line with the increases in rates of unemployment benefit. Some 5,300 people now avail of the scheme.

One of the commitments in our Programme for National Recovery was that a detailed study would be carried out to identify what adjustments might be necessary to improve the take-up of the scheme. A review is underway and the report is expected shortly. The results of this review will guide the future development of the scheme.

I should mention at this point that arising from points made in the course of the debate on the Bill in the Dáil an amendment has been incorporated which will enable me by regulations, to change the upper limits for entitlement to family income supplement. Under the scheme at present there is a limit of five on the number of children for which the upper limit of income is increased. The Bill will enable the upper limit to be further increased by regulation and when the results of the review of the scheme are available we can consider what changes are warranted.

Section 9 of the Bill provides for powers to make regulations which would allow for a waiving of interest charged on arrears of social insurance contributions. This will facilitate the special incentive scheme announced by the Minister for Finance to encourage taxpayers to bring their tax affairs up to date.

Part III of the Bill provides for the extension from 6 April of social insurance coverage to the self-employed, one of the most significant developments in the social welfare system for many years. Since the Government decided in principle last July to introduce the scheme this year, a lot of work has been done to prepare for its introduction. I want in particular to express my appreciation in this regard of the work done by the National Pensions Board whose report has been of great value to me in preparing my detailed proposals on the scheme.

The need for extending social insurance to the self-employed has been generally accepted for many years. It will give self-employed people the opportunity of acquiring entitlement to non means-tested pensions as of right for old age or widowhood. Secondly, it will bring greater equity into the financing of social welfare as a whole.

The Commission on Social Welfare was of the view that the further development of social welfare in this country would be best pursued by expanding and improving the present system. The extension of social insurance to the self-employed is fully consistent with the Commission's view and in fact involves the implementation of one of their major priority recommendations.

Excluding the self-employed, who comprise over 20 per cent of the workforce, from compulsory social insurance resulted in the majority having to rely on means-tested social assistance. The result of this policy has been inadequate pension cover for this large segment of the workforce and inequity in the financing of social welfare generally.

Section 11 of the Bill contains the main provisions of the new scheme and provides for the insertion of a new chapter into the Social Welfare (Consolidation) Act dealing specifically with self-employed contributors. The persons to be covered by the scheme are defined in terms of their sources of income. Self-employed people generally pay income tax under Schedule D. Schedule D income will now, for the first time, be liable for a PRSI contribution. The contribution will be collected along with income tax and the rules for collection of tax will apply to it. As Senators will know, signficant changes are being made within the tax system for self-employed people designed to make the system more effective, including the introduction of self-assessment. These changes will apply also in the collection of PRSI contributions from the self-employed under Schedule D.

In addition to income under Schedule D, certain income under Schedule E will also be liable for contributions under the new system. The main category of people involved are some 40,000 proprietary directors of companies. They are liable for income tax under Schedule E but they are not employed under a contract of service and so are not covered by the social insurance system. The Bill provides that payments, other than earnings raising from insurable employment, made by way of salary by a company and classified for income tax under Schedule E, will also be liable for contributions under the new scheme.

Income under Schedule D includes earned income, that is, income from a trade, profession or vocation. Schedule D also includes, with Schedule F, unearned income, that is, income from rents and income from investments such as dividends and interest. Unearned income is already subject to the health contribution and to the employment and training levy.

The Government have decided that both the earned and unearned income of self-employed persons will be assessable for PRSI contributions and reckonable income is so defined in section 10 of the Bill. Capital allowances, however, will be deducted in calculating the reckonable income and in effect PRSI contributions will be levied on income as assessed for income tax purposes, as outlined in the Programme for National Recovery.

There are certain types of income, which come within the ambit of Schedule E, other than employee income and which will be excluded by regulation from liability for PRSI contributions under the new scheme. These include social welfare and occupational pensions which it would not be appropriate to subject to PRSI contributions and income from the holding of public office. The position of public office holders is analogous to that of public servants who are subject to limited insurance which does not include cover for contributory old age pension. The Commission on Social Welfare recommended that full social insurance cover should be extended to public servants and the position of office holders would fall to be considered in that context. The National Pensions Board are preparing a report which will cover the position of public servants.

In addition to exempting certain types of income it is also necessary to exclude certain categories of person from the scheme. Section 12 of the Bill lists the categories of persons to be excluded. The main categories of persons excluded are: assisting relatives; persons on unemployment assistance; persons with income below a prescribed amount; employed contributors or occupational pensioners whose only income under Schedule D is unearned income; and certain persons in modified social insurance such as permanent and pensionable public servants.

The Government in their decision in principle to introduce the scheme in July envisaged that assisting relatives would be covered. However, the National Pensions Board concluded that the position of assisting relatives calls for further examination and advised that they should not at this stage be brought within the social insurance system. I have accepted this advice and will consider their position when the board reports on pension coverage generally.

This exclusion will not apply in the case of married couples who are partners and who jointly own and operate a self-employment enterprise. They will each be insured as self-employed in their own right with a contribution payable by each and each having an independent right to pension.

Self-employed persons on low incomes may qualify for unemployment assistance at present. It is not considered that such persons should be covered by and required to contribute to the new scheme. Smallholders on unemployment assistance already come into this category. Those who have previously been insured as employees may be entitled to credited contributions which maintain their entitlement to contributory pensions. Provision will be made in regulations to enable self-employed persons to qualify for credits on similar lines.

In addition to the exclusion of persons on unemployment assistance there will also be a general exclusion for people whose total income is below a certain level. This level will be prescribed in regulations but I envisage that, initially at least, the level will be set at around £2,500 a year which is approximately the rate of the old age non-contributory pension for a single person. There is already under the scheme for employees an exclusion in respect of employment of inconsiderable extent and an exclusion of this kind is also appropriate in the case of self-employed people. The only feasible way to provide for this in their case is by reference to income and I consider that a level of around £2,500 per year is a reasonable one.

Other categories whom it is proposed to exclude from the new scheme are employed persons and occupational pensioners whose only other income is unearned income. Permanent and pensionable public servants are not covered for contributory old age pension at present because they have adequate occupational cover. They may, however, have some additional income from self-employment. They will also be excluded. Otherwise they could, in return for a relatively small additional contribution, acquire entitlement to contributory pension additional to their occupational pension.

Apart from the excepted categories the scheme will be compulsory for all self-employed persons just as the scheme for employees is compulsory. The suggestion has been made that self-employed persons who are in a position to make their own pension arrangements should be free to opt out on the grounds that this would ultimately result in net savings to the Exchequer. In fact, the opposite is more likely to occur. I could not accept an optional scheme of this kind which would run counter to the principle on which social insurance is based. Every pension scheme is based on a mixture of good risks and bad risks and this is particularly the case with social insurance schemes under which coverage is so broadly based.

Moreover, if the persons concerned failed to maintain their pension cover and ended up with no income in old age or if their survivors had no income, the general taxpayer would be required to provide them with a basic means tested payment, but no direct contribution would have been paid by them.

Many persons who are or were voluntary contributors under the present system will now become compulsorily insured under the new system. As voluntary contributors, the persons concerned would have been covered for additional benefits such as retirement pension from age 65, deserted wife's benefit and death grant. It would have been necessary to have provided for three separate voluntary contributions at relatively low rates to enable them to have maintained this cover. This could have resulted in the cost of collecting such contributions exceeding the actual revenue. I am, therefore, making provision in this Bill that any additional benefits for which these persons were insured as voluntary contributors will be maintained under the new arrangements.

Provision is also being made to enable persons who cease to be compulsorily insurable as self-employed contributors to maintain their social insurance cover by the payment of contributions voluntarily. Such persons will be required to pay £208 annually. A flat-rate contribution is necessary in their case as by definition they will not have reckonable income or reckonable emoluments on which an income-related contribution could be levied.

I would now like to outline the benefits to which self-employed contributors will be acquiring entitlement from 6 April. Social insurance cover will be extended to the self-employed for old age and widow's and orphan's pensions. The same contributions conditions which apply at present for entitlement to these pensions in the case of employed persons will apply in the case of self-employed persons. Thus after four years a self-employed man who is married will have acquired for his family an entitlement to the contributory widow's and orphan's pension.

Entitlement to the old age contributory pension will be acquired by self-employed persons after completion of a minimum of ten years insurance before reaching age 66. Periods of insurance completed previously either as employees or on a voluntary basis will be taken into account and may enable the persons concerned to obtain entitlement to pensions earlier.

Explicit provision, however, has been made to avoid anomalies arising in the case of persons with previous insurance. Senators will be aware that when social insurance was extended in 1974 to non-manual workers who had been excluded because their income was above the limit for insurability, previous periods of insurance which had been completed when their income had been below the limit served subsequently in effect to deprive them of entitlement to an old age pension. This arose because of their contributions were averaged from their first date of entry into insurance. This resulted in their average from that date to the end of the last contribution year before pension age being too low to qualify for pension.

I am pleased to say that this will not arise under this scheme. Persons with previous insurance who become self-employed contributors on 6 April 1988 will be able to choose that date as their date of entry if it is more favourable to them than calculating their average from their previous date of entry. This is provided for in sections 13 and 14 of the Bill.

Persons who fail to qualify for an old age contributory pensions will be eligible for the old age, non-contributory, pension on a means-tested basis. Up to the present, persons who entered insurance for the first time within ten years of reaching pension age have been entitled to a refund of the old age pension element of the contribution on the basis that they would be unable to qualify for a pension. Such refunds were paid irrespective of whether the persons concerned subsequently qualified for an old age non-contributory pension. As self-employed persons were not compulsorily insurable and as the majority did qualify for the old age non-contributory pension refunding contributions to employed contributors in these situations was clearly justifiable.

However, it would now be difficult to justify such refunds when virtually all persons whether employed or self-employed with an independent income are required to contribute. Persons who qualify on means grounds for a pension receive a substantial entitlement fully financed by the Exchequer. If they have contributed for even a short period as insured persons, such contributions should, in equity, be regarded as in part contributing to the cost of the old age pension. The National Pensions Board referred to this matter in their report and recommended that the refund of the old age pension element of the contribution should only be made, provided the person concerned does not qualify for a pension on a means-tested basis.

I am accepting the advice of the National Pensions Board in this regard and the necessary provision will be made in regulations.

Representations have been made to me in relation to self-employed persons who have never been insured before but who, because they have less than ten years to go before pension age, will not under the present rules be able to qualify for an old age pension. My Department examined in detail the possibility of making special provision to enable such persons to continue paying contributions after age 66 until they had ten years of insurance completed. The potential cost of this concession, however, would be prohibitive. It was estimated that in year 11, the first year in which the persons concerned would qualify for a pension, the additional cost of paying them the pension would be £40 million for the full year alone. This would actually exceed the total amount of contributions collected from them in the previous ten years and would be a major continuing cost over the following years. Accordingly, they have not been included.

The National Pensions Board concluded that the conditions for entitlement to invalidity pensions as they apply at present to employees would not be appropriate for the self-employed. They undertook to deal with the whole question of invalidity pensions in a future report and recommended that, in the meantime, pension cover for this contingency should not be provided. I accepted the advice of the board and recommended to the Government that invalidity pension cover for the self-employed be postponed until I receive the board's report.

It was also envisaged that entitlements to the old age pension in the case of the self-employed would be subject to a retirement condition. The National Pensions Board, while recognising the importance of retirement condition in the case of the self-employed, decided that they would need more time to examine the full implications of introducing such a condition. Therefore, the Government decided that in the meantime old age pension cover the the self-employed would be on the same basis as for employees, namely, a pension from age 66 without a retirement condition. Both of these questions, the retirement condition and the invalidity pension, are matters that will be further considered in the light of the report of the pensions board.

The one aspect of the proposed scheme that has given rise to most discussion has been the cost of and the financing arrangements for the scheme. Concern has been expressed that the scheme will put a longterm financing burden on the Exchequer and that the rate of self-employment contribution is not high enough. Much of the comment which has been made has not, however, been well informed and I would like to clarify a number of points in this regard.

A majority of the members of the National Pensions Board recommended that, on the grounds of equity, the rate of contribution should be the same as the combined employer-employee rate for old age and widow's and orphan's pensions — that is a rate of 6.6 per cent, when allowance is made for the tax relief on the employer's contribution. The board recognised, however, that in setting the rate of contribution the Government would have to take into account the ability of the self-employed to pay the rate recommended. This is, of course, what the Government did in deciding to phase in the contribution to be paid over three years. Thus, the contribution will be 3 per cent in the contribution year 1988-89, 4 per cent in 1989-90 and 5 per cent in 1990-91 subject to a minimum contribution of £208 in each year and this is explicitly provided for in the Bill.

The board also considered that a minimum contribution is necessary in the case of the self-employed paying income-related contributions, given the fact that capital allowances are deductible for PRSI purposes. Otherwise self-employed persons with a reasonable level of income who could claim for relatively high capital allowances, could end up paying a very small amount by way of a self-employment contribution. A minimum contribution of £208 or £4 per week is reasonable in these cases.

The Government also accepted the view of the National Pensions Board that it is necessary to have a system of flat-rate contributions for those whose incomes are below the level at which they are regularly assessed for income tax by the Revenue Commissioners. It was concluded that a flat rate contribution of £208, equivalent to the minimum contribution for those paying income-related contributions would not be justified. The level of flat rate contribution for people in this situation has been set at £104 per annum which is the equivalent of £2 per week.

In deciding on the rate of contribution to be charged, the Government have also been determined to ensure that the yield from the contributions would be adequate to meet the additional cost of the proposed scheme and, at the same time, reduce the existing burden on the Exchequer of financing social welfare pensions for the self-employed. The first issue in this regard that had to be considered is the overall cost of the scheme and the estimates of the cost over a 50 year period have been set out for all to see in the report of the National Pensions Board. The Government fully accept these estimates.

Given the speculation in recent weeks about the impact of the proposed scheme on the Exchequer, I would like to refer, in particular, to the projected additional costs of the scheme. The board showed that the additional costs, over and above the costs of continuing the present arrangements, will be just £6 million in year five, £21 million in year ten, £73 million in year 20, £99 million in year 30, and £89 million in year 50.

Much of the erroneous speculation, however was based not on the cost but on the anticipated yield from the self-employment contributions. This was due to a misunderstanding of the yield for 1988 of £15 million referred to in the Financial Statement of the Minister for Finance on budget day. That £15 million is the estimated yield of a 3 per cent contribution to be collected in an eight-month period only from April to 31 December this year and no account was taken in that estimate of any yield from the flat rate £104 contribution as the collection arrangements for that contribution will not be operational in time to effect any significant yield this year.

The Revenue Commissioners have estimated that in a full contribution year the actual yield from a 5 per cent contribution will be £45 million and that the flat rate contribution would yield an additional £5 million when the collection arrangements for this contribution are fully operational. This is a conservative estimate and I am confident that the actual yield may prove to be significantly higher.

Serious allegations have been made during the past few weeks that the Government, in introducing this scheme, are aiming merely to achieve a short-term improvement in the State's finances but at the price of incurring major liabilities in the longer term. This is not the case and, in fact, express provision has been made in this Bill for a review of the scheme to be carried out in a little over two years from now in the period October to December 1990. At that stage data on the actual yield from self-employment contributions will be available. By that stage too, the final report of the National Pensions Board will be available which will, among other things, contain a detailed examination of the projected cost over a 50-year period of the existing scheme for employees.

On the basis of this information the Government will then be in a position to decide what level of contributions based on the principle of equalised contributions recommended by the National Pensions Board will be adequate to finance basis social welfare pensions over a 50-year period. This information will be arrived at objectively and will show what is required to maintain the financing of social welfare pensions on a sound footing and, in particular, what level of contribution should be made by all contributors whether in employment or self-employment.

I would now like to say a few words about the collection of contributions from the self-employed. Those whose incomes are subject to Schedules D and F will pay the social insurance contribution, health contribution and employment and training levy with their income tax. The government have decided that collection of the self-employment contribution, health contribution and employment and training levy will be combined with income tax in the case of Schedule D taxpayers in the same way as the PRSI contribution is combined with income tax under the PAYE system. Thus, when a person subject to Schedule D receives his demand for tax, the amount charged will include income tax and PRSI contributions. The new system will be much more cost effective, will result in much greater compliance on the part of contributors and will also be more straightforward for contributors who will now have just one tax demand to deal with.

I would like the Senators to particularly note the collection arrangements because the integrated collection system is totally new and will overcome many of the problems previously experienced. Previously when moneys were outstanding, the demands both administratively and legally for the tax amounts were dealt with separately from the demands for PRSI and health contributions. That has been one of the major weaknesses in the system. The one procedure will now bring that money in together. It also means that the penalties which apply in the tax area will now apply. That is something which should not be overlooked.

In the case of those self-employed contributors, for example proprietary directors, who are subject to tax under Schedule E, they have hitherto been liable for a class K contribution of 2.25 per cent which represents the health contribution and employment and training levy. From April they will be liable for a new class S contribution which will include in addition to the existing 2.25 per cent, the extra 3 per cent PRSI contribution, increasing to 4 per cent and 5 per cent in line with the contribution of self-employed contributors generally.

The income-related contribution of 3 per cent, 4 per cent or 5 per cent, subject to the minimum of £208 per year, will be collected by the Revenue Commissioners and liability will commence from 6 April next. The £104 flat-rate contribution will be payable by persons who are not being regularly assessed for income tax. On the basis of information on their income supplied to the Revenue Commissioners, the person concerned will be formally notified that they are not required to make a return of their income but that they may be liable for the £104 contribution. Whether they actually have to pay that contribution will depend on whether their income exceeds the minimum level of £2,500 for inclusion as a self-employed contributor. The notifications from the Revenue Commissioners to the people concerned will have issued in the bulk of cases by the end of the summer. I am taking the necessary powers in the Bill to enable the actual liability for the first year in these cases to be prescribed in regulations. The precise mechanism by which the £104 contribution will be collected and the date of commencement of this aspect of the scheme are under consideration at present and the details will be announced as soon as possible.

Moving on to the final part of the Bill, there are a number of proposals to improve and streamline some of the existing provisions of the Act. A series of measures in relation to prosecutions, proceedings and increases in fines for offences in relation to the Social Welfare Acts is contained in sections 19 to 22 of the Bill. Section 19 provides that an offender shall not get the benefit of the Probation Act until such time as any amounts due to be repaid to my Department have been repaid. Section 20 is an omnibus provision which consolidates the existing provisions in relation to proceedings and prosecutions for offences under the Social Welfare Acts.

Section 21 and 22 provide for increased penalties and fines for prescribed offences for employers and employees under the various insurance and assistance schemes. The maximum fine for conviction on indictment is being increased from £3,000 to £10,000 and the maximum term of imprisonment is being increased from two to three years. This will bring the provisions into line with those provided for in the Social Welfare (No. 2) Act, 1987. Certain fines for lesser offences are also being increased.

Senators will be aware that a great deal of work has been done in preventing fraud and abuse of the social welfare system in the past year. We are making considerable headway in tackling this issue. I have always said that the vast majority of claimants are fully entitled to their social welfare payments and are only interested in obtaining what is legally due to them. However, there are some unscrupulous employers and employees who seize any opportunity to exploit the system or, indeed, to manipulate it to their own benefit. These people have no regard for the legitimate rights of the vast majority of social welfare claimants. They have no regard for the hundreds of thousands of taxpayers who maintain the social welfare system through their contributions for those of their fellow workers who depend on social welfare payments.

Section 23 is a technical amendment to the disability benefit scheme which provides that, for the purpose of determining whether a claimant has exhausted 52 weeks' entitlement to disability benefit, only claims which occurred during the previous six years will be taken into consideration. It introduces a cut-off point of six years beyond which previous claims will not be reckoned. This will affect only a very small number of claims and will operate to the advantage of the claimants concerned.

The opportunity was taken in last year's Social Welfare Act to round to the nearest 10p the weekly social insurance and assistance personal rates and increases for adult and child dependants. The purpose of the rounding was to simplify as far as possible the large number of payments now being made. Section 24 applies to amounts of injury benefit and unemployment assistance payable for periods of less than a week while section 25 provides that the scale of rates for unemployment assistance purposes will be in units of 10p rather than 5p as heretofore.

Section 26 of the Bill removes the obligation on urban local authorities to contribute towards the cost of unemployment assistance. The contribution which has been in operation since 1933 and which is based on rateable valuation amounts to about £0.5 million per year. In the context of annual expenditure on unemployment assistance of £444 million and in the light of the size of the Exchequer contribution to local authority financing, the current contribution is anachronistic and is, in effect, a circular transfer between State agencies. The amount involved will be met in the future by the Exchequer.

Section 27 of the Bill provides for an amendment to the Employers' Employment Contribution Scheme Act, 1981, so as to permit the unspent funds of the scheme to be transferred elsewhere. The purpose of the scheme, which operated for a period of one year, 6 April 1981 to 5 April 1982, was to maintain employment levels in the textile, clothing, footwear and leather industries. It was funded by employers to the extent of an additional 0.2 per cent on their share of the PRSI contribution. At present, there is a balance of about £15,000 remaining in the scheme's account and about £370,000 awaiting transfer from my Department. This arose from delays in the collection of contributions for the year in question arising from liquidations and receiverships.

In total there is £385,000 there. The provision in the Bill enables both existing and future funds to be transferred to the occupational injuries fund which is financed entirely from contributions from employers. I thought this was the fairest way to treat these funds since they were funded by employers directly in the first instance.

I now come to a new pre-retirement scheme which I see as a very important initiative and part of my ongoing efforts to introduce greater flexibility into the unemployment payments system to cater for the needs of particular groups. The rapid increase in the numbers unemployed in recent years has highlighted the fact that there is a great diversity of groups of unemployed persons on the live register. Some are prepared to accept part time jobs in the hope that they will lead to full time work; others would like to use this period of enforced inactivity in a constructive way by improving their educational attainments. Some persons would like to become involved in community activities and volunteer their services for the good of their communities. I have always felt that we should cater for the varying needs of the unemployed in so far as this is possible within the confines of my Department's main business which is to provide income maintenance to those not in a position to support themselves or their families.

Provision is being made in this Bill to cater for one group, namely, the older long term unemployed. The pre-retirement scheme is intended to provide more flexible arrangements for older unemployed people many of whom are in fact semi-retired and not really members of the labour force. At present, these people are required to sign on each week at their local office where they receive their cash payments. This new scheme would relieve claimants of the necessity of attending the local office while, at the same time, providing them with alternative arrangements for receiving their basic income maintenance entitlement.

Section 28 of the Bill sets out the basic conditions to be satisfied by a person in order to be eligible for the pre-retirement allowance. The scheme will be optional. Those who qualify for the allowance will be paid by pension order book which can be cashed weekly at their local post office and they will not have to attend the local office to sign on. However, they will be asked periodically to confirm that they are still, in fact, retired. Initially, the scheme will be confined to persons over 60 years of age who are entitled to the maximum rate of unemployment assistance.

Section 29 of the Bill extends the scope of the occupational injuries benefit scheme to unemployed persons undergoing training courses provided by ACOT and CERT. FÁS trainees — formerly AnCO — already have cover for occupational injuries benefit and also have contributions credited to them during periods of training. A similar facility is being provided in relation to ACOT and CERT trainees.

Section 30 of the Bill provides that regulations may be made giving entitlement to pensions at a reduced rate to those persons who, having earlier left the insurance system came back into insurance on 1 April 1974 when the earnings limit for insurability was abolished and all workers became compulsorily insured, irrespective of their income.

Before 1974 non-manual workers whose earnings exceeded a prescribed limit were excluded from social insurance. This limit was increased from time to time and consequently some persons found themselves in and out of insurance for periods as their earnings fluctuated about and below the limit set.

They now find themselves adversely affected when they reach pension age because of the intermittent nature of their insurance records prior to 1974. The yearly average of contributions necessary for qualifying for pension in their case is calculated over a long period going back to when they first became insured and is diluted by the gaps in their record caused by the periods when they were out of insurance. Consequently, the minimum average number of contributions necessary is not satisfied in their cases and they do not qualify for pensions.

By contrast, those who had never been insured prior to 1 April 1974, because their earnings were reasonably high and they were always over the insurable limit, have the yearly average number of contributions calculated over a shorter period which only goes back to 1 April 1974, the date they first became insurable.

Thus it can happen that this latter group may qualify for pension on the basis of relatively short periods of contributions while others who may have contributed over a longer periods and overall have paid a greater number of contributions may not qualify for a pension at all.

I have been very concerned about this anomaly for some time. The plight of this group of former workers was highlighted in the report of the Commission on Social Welfare. This provision will enable me to do something for the 1,250 persons now involved. Following the enactment of this legislation, I will be making regulations providing reduced pensions for them in line with the commission's recommendations with effect from October next.

The Bill provides for the transfer of information, whether computer based or otherwise, between the Department of Social Welfare and the Revenue Commissioners so as to facilitate the proper administration of social welfare schemes including the registration of self-employed contributors. Provision is also made for the transfer of information between the Department and other specified bodies such as local authorities and health boards for the purpose of the administration of social welfare schemes and other schemes administered by these bodies.

By any criterion this Bill is a major piece of legislation containing a number of very significant improvements in the social welfare code. The extension of social insurance to the self-employed, which is long overdue, will fill a major gap in the present system. The other provisions in the Bill also represent very significant improvements for people who depend on social welfare. I am very pleased to be in a position to propose this package of measures and I commend the Bill to the House.

A lot of work went into this Bill and I would like to congratulate the Minister on it. The last time he was in the House we had an argument about what was in the legislation. Today it is different. I would have to admit that a lot of thinking went into it. Generally, we are trying to get money from people from whom we did not get it before, and that is only right. How we are going to get it is another argument. The Minister said that people unemployed in the long term would get a 3 per cent increase and people living alone are getting an increase of 11 per cent, and rightly so. The Minister is to be congratulated on that. I am glad to see that the person who is living alone and on long term unemployment benefit will now be getting over £40 a week. This is still not enough.

All people on unemployment assistance are getting that, not people on unemployment benefit.

That is to be welcomed. At least we have recognised that to expect people, particularly men and women who live alone, to live on £34 a week, paying out £15 a week and more for accommodation was just not realistic. Even £42, or a little more is not enough.

Let me expand on the first statement the Minister made in regard to the money for large families, and the 6 per cent increase for dependent children in particular. Let us see how this compares with benefit for other categories. For example, the report on social welfare points to anomalies in regard to what we expect people to live on. A couple on an old age pension will receive an increase of £3 a week bringing them to approximately £100 a week. A married couple with three children will get an extra £6.70, bring their total to £98 a week. I am not saying that our old people should not be looked after. How can we justify a situation where a couple on old age pension are living on one road, and around the corner their own son or daughter and three children are living on less money? That is where the anomalies are.

I know that a lot of money is being spent on social welfare every day. I am very much aware that the Minister has a mammoth task. When are we going to realise that there are people — I see it in my area and the Minister must see it in his — who are expected to live on nothing?

This Bill before us contains no incentive at all. There are excellent ideas in it. There are excellent benefits being provided, but there are benefits now being given to people who are well covered by their own pension schemes. Yet there is no incentive at all to employers to create more jobs. That is the area I would watch. I would love to be able to see the possibility of creating 1,000 jobs. We should be able to say to the man with three children who is going to get £98 a week that rather than be giving him that money we will create something in the way of employment.

The old age pensioner, with £99.20 and free fuel, free electricity and free television licence is certainly better off than the person with the three children on £98 a week. That is the point. How can we say that we should not make major changes? I mean no disrespect to the elderly — I certainly recognise that for too long we did not do enough — but there are areas of anomaly in the social welfare system. Let me give another example.

In one of my clinics no more than three weeks ago I had a wife with four children on her own pension of something like £58 a week; her husband, because of domestic differences had his own allowance of £43. He left the house. She had to make representations to the Social Welfare Department that he had left the house, and searches went on. Yet she, with four children, had to live on £58 a week while an unmarried mother of one gets £59 a week. A married woman with four children is asked to live on £58 a week because her husband decided not to live with her any more. Next to unemployment our biggest problem is marital breakdown. There is no question about it. I am hearing it, everybody is hearing it, but I could do nothing for this woman except to go to the supplementary welfare officer on Saturday morning, and I had some job to get money for her by Monday.

These are the points I cannot understand. Why should we say, for instance, that there is a difference between the first and the sixth child? Why should there be two different categories? There were six different categories; now we are down to two or four. There should be no difference at all between the first and the last. What is the difference? Why cannot we give so much per week for each child and leave it at that.

The Minister said that people who are self-employed are now going to contribute up to 5 per cent in the next three years. They are going to do very well out of it but, at the same time, we will have people in a diabolical state looking for extra money. More must be given to the less well off.

A widow with three children in receipt of a contributory pension will get an increase of £2.80 per week giving a new rate of £93. Imagine having no husband and trying to live on £93 a week. Yet there is a couple around the corner with an old age pension of over £110 a week. I am not saying the couple on old age pension should not get the money, but they do not need as much; they do not eat as much. They certainly need heat and they certainly need comforts, I am not denying that, but how can we justify the position of the family around the corner who have no father and have to live on only £93? These are the points I want to make. She needs more and we should be giving it. She is rearing three of our children. That is the vital point I would like to make.

A family with two children in receipt of long term unemployment assistance will receive an increase of £6.20. A family with six children in receipt of long term unemployment will receive £124 per week. What is the reason for saying we should be giving a certain amount for every child? Can we do something for the man with six children? What are we doing to give this person some type of work? What do we say to the employer who is going to employ him? Are we making any argument in favour of him? The Minister made many arguments in his contribution about the pensions or the benefits being given to the self-employed. He made good points in it, but there are areas which will cost enormous sum of money. People will get benefits to which they are not entitled.

I make no apologies for saying that as I am self-employed I do not think I should be getting any benefits through the PRSI system. I should be paying into the system. I do not think I should get benefits from it because I am not entitled to them. I can pay a pension privately to any company and get a tax benefit. Why should I get the benefits of a tax relief on a pension I am already paying for? The Minister is demanding it from me now and it will be legal. The Revenue Commissioners will say: "Pay this and when you are 65 years of age you will get a cheque". When it comes to my time the age will probably be 60 years.

The Minister has already admitted that he is prepared to say to the long term unemployed, who are not in the work area and who are over 60 years of age, that they will get a pension book. The Minister is admitting now that the retiring age is 60, because there is no work available for them. We take them off the unemployment list and we give them a pension, thereby giving the impression that they are not unemployed and the unemployment list will drop. That is only diversifying from one area to the other and it is still costing the State money. In the long term, the answer to the unemployment problem is to retire people at 60 years. If we do that what will it cost the State because we will be five years ahead of our time in trying to pay it out?

I think collections will be made from the self-employed. I am very worried that the figures the Minister is speaking of will not be good enough. The Minister is saying to me that I must now pay a contribution to the State and that I will get a pension from the State at the age of 65 when I may not need it. I admit it will be taxed.

How are we going to say to a consultant — who cost the State in the region of £30,000 to educate — that if he pays a contribution now he will get a pension when he is 65 years? That is ridiculous. Yet we have people who are literally starving and 25 per cent of all our people are below the poverty line.

We have mass unemployment. There is nothing in this Bill to say that more employment will be created. The Minister had done everything in his power, from a social point of view, to make sure the unemployed are looked after from a welfare point of view. I am not denying that. We must create employment. Is that another Minister's area of responsibility? The Minister must do his best with £7 million a day or £50 million a week. How can employers say to employees and those poor people who pay PRSI contributions that they will get less at the end of the day? We are getting less because of the health cuts and the higher health contributions.

A person earning under £16,000 a year is charged £10 per day in a public ward in a hospital. That is the point I want to make. Employers should be entitled to employ people for two or three days per week. These schemes have been in operation since 1985. Is there enough emphasis on this then? I want employers to be able to say: I want to employ a person for so much but I want to give the State less and the employee more." When will that happen? The employer takes less notice of the Government and place more emphasis on employing two more people in the year. These are areas in which I would like to see improvements. The unemployed are now costing almost £8 million a day and the figure is increasing.

The Minister referred to the fraudulent areas. He did not say he has got on top of it or that he is aware that there is a massive black economy. Is anybody here saying they are not aware that painters, carpenters and everybody in the trade area are working in the black economy? Of course they are. We would be utterly stupid if we did not recognise that. What is that costing the State? The employer says the contributions are too high. For instance an employer who has an employee earning £200 a week as a painter or carpenter would have to pay a high contribution. The are much better off saying: "draw unemployment assistance and take so much from me and both of us are covered."

I am aware of State tenders that were given by State bodies to builders in the Cork region, where there is a massive black economy, and the State could do nothing about it. Yet it was a State job costing £7.7 million. I have positive proof that those people were working in the black economy and nothing could be done about it.

Those are PRSI contributions.

This is an area from which we are not receiving contributions. Why are the contributions not being paid by these people? If the Minister wants to get the proper contributions, ideas on that matter have been put before this House previously. At present in the other House a debate is taking place about identity cards to curb under age drinking. Why not have job cards? The Minister referred to the introduction of a computerised system between Dublin and other areas and I welcome that. Why not have a job card system whereby a person's card, if he is legally employed, should be with his employer? If he is not working his card should be kept in his local employment exchange. There is no reason why that cannot be done and the PRSI contributions would be made.

At present there is a massive black economy and the Minister is aware of that. No incentive is being given to get 4,000 or 5,000 more people working legally. When will they be able to go out and do their own work and bring their job card with them? If you have your job card out, you do not get unemployment assistance. If a person is working he can be checked on. This system could be introduced into one area on a trial basis. If it does not work, at least it will have been tried. It would be fed into the computer system in the same way as a credit card. It is the very same system. There are areas of massive abuse. This can be seen in the construction industry, where the black economy is rampant and PRSI contributions are not being paid. The Minister said: "Excluding the self-employed who comprise over 20 per cent of the workforce from compulsory social insurance resulted in the majority having to rely on means-tested social assistance". Is the Minister saying that any person who is over 56 would not be entitled to make contributions under the new system? Yet the Minister readily admits they can make a case for a non-contributory pension. The Minister is saying that because they would not have ten years' contributions they are to be excluded. Why will they not be included? Why not include them rather than having them go through a means test for non-contributory pensions? The Minister might look at this area. These people will apply for non-contributory pensions anyway.

The money is to be collected by the Revenue Commissioners. The self-employed generally pay income tax under Schedule D. I understand that. For the first time, they are to be liable for PRSI contributions. The Minister said they must pay an amount of £208 or £104, but what happens if these amounts are not paid? How confident is the Minister that these contributions will be paid on time? How confident is the Minister that the self-employed — 20 per cent of the workforce — are going to get involved? Is the Minister going to sell the scheme? Will he do as, for instance, the ESB do when they want to sell their projects or will he have some excellent ideas as the Minister for the Environment has regarding the new tenant purchase scheme? In other words, is there any way the Minister can sell the scheme? Perhaps the Revenue Commissioners could send out forms explaining exactly what the scheme is and what will be its long term benefits. That would help to get money in. In other words, let us not demand, let us just show, explain and sell what we are doing. Let us not always be sending out demand notes, let us sell the scheme to the people who might take an interest. Let us not give the impression that because it is from the Revenue Commissioners that everything is going to be taken from the self-employed. I am not saying that they should not be paying contributions, they should, but I do not think they should be getting the benefits and I will stick by that. They should be getting fewer benefits. Perhaps a family should get the benefit if it is a question of the self-employed person not covering himself for his own pension.

The Minister lays great emphasis on this scheme. I am surprised that so much work has gone into it but I suppose it is necessary to explain every point. How the Minister can say, that in general we should be giving the self-employed in general extra benefits, every type of pension, while admitting that many of them will be covered by way of privately-funded pensions? The cost of the scheme to the State is going to be enormous, in fact I wonder if we will be able to cover it though the Minister seems to be confident enough about that. I say it is questionable. Obviously that confidence is based on a certain amount coming in.

As I have said, when the Revenue Commissioners were sending out the forms, they should try to sell the scheme rather than make demands. That is the best way of getting money in. Why is it that we put so much emphasis on the scheme when we readily admit that a very high percentage will be covered by private pensions? I know there is a catch in it. If a person who is retiring in five or seven years time has himself covered for £7,000 or £8,000 a year, he will already have got the tax benefit while paying into the pension fund, in other words, if he pays £2,000 a year into a pension he has the tax allowance on that but the Minister is saying that if that person gets a State pension, the pension will be taxable. In fact, though, he stands to gain much more from the system than he would lose by way of the pension being subject to tax in the normal way. The benefits he will have outside of the pension itself are enormous. He comes into every category.

Those who all along have been paying PRSI and PAYE may not be too happy that these self-employed people who comprise 20 per cent of the workforce, and who are now to begin contributing 3, 4 and then 5 per cent by way of contribution are to have all the benefits. What would a fellow in Irish Steel, in Cork Corporation, or in Dublin Corporation say to that? I do not think he would like it. An oil lorry driver earning £17,000 a year is not eligible for a hospital services card because his income is over £16,200. He has to pay voluntary health contributions as well. The self-employed person could be making anything up to £50,000 a year but his rate of contribution would be the same as that of someone on quite a low income.

The Minister reckons so much money will be coming in, I reckon there will be less. I do not think it will be that easy, but I feel we should be asking is it right that we should be giving these benefits? Let us take the people on the common contract — the Minister was in the Department of Health for a long time and he is certainly aware of the moneys being paid out to these people we are now bringing in under this scheme. I know what is being paid to people on the common contract for working so many hours per week as a State employee. They earn in the region of £30,000 to £40,000 per annum. They are professional people and yet they are to be covered by this scheme. This is a bit much. It is a bit heavy in the eyes of the person on £7,000 a year who cannot come home with £5 a week more because he has to pay PRSI and PAYE contributions. Where are our priorities? Certain people in the public sector and in the Civil Service, do not get cover at all nor a pension and they have done a lot more for the State. They are not being recognised but they may be recognised by October 1988 and I think that is richly deserved. There are people working at local authority level who do not have this facility either.

When I go down to Cork tonight, how can I say to a person on £7,000 a year who is working in an office all week that in actual fact the person on £44,000 a year how has benefits that he does not have? What would he say to me? He is paying tax and PRSI every week and is working very hard. Many are working very hard and yet they get no benefit. I do not think that is fair.

I made the point in the last Bill that came before us, that if we want to broaden the base we should draw one line right across the board and have everybody cover their own health contributions in proportion to their income. We should take so much from every person as a PRSI payment every week, irrespective of who they are. Those who earn over £10,000 a year will pay another percentage onto that again.

If we want real change, we want everybody involved, we must involve the person who is painting for himself, the person in the black economy and everybody else. If they do not want to have cover for themselves and their families, that is their problem. For instance, let us take the family income supplement; 5,000 people are availing of that but how many people are eligible who do not avail of it because of the embarrassment of having to indicate such need? Why should a man or his wife in this position be asked to claim every week? Should the employers concerned not be asked to bring the wages of such people up to a proper level? Why should we treat those people in this way and give a person on £50,000 a year a pension? If we want change, let us change. Let us tell the employer who is paying an employee £110 a week to take a certain amount out of the person's PRSI contribution and give it to him instead of the State paying him family income supplement. That would be much easier and would avoid embarrassing the couple who have to look for money because they have not enough, even though they are working. Why can that not be done? We will give the public consultant, who might work 22 hours a week if he feels like it, a pension if he contributes at 5 per cent over three years. Where are our priorities? These are things which I cannot understand.

The Minister is spending a lot of money and I know he wants to spend it on the right things but is that happening? The Minister is looking to the people who are making a lot of money and is hoping to get 3, 4 and 5 per cent contributions from them over a three year period. He is confident that it is the right thing to do so that those people can get pensions. As I have said, I know people in the self-employed category who pay contributions and will not get a pension. Some people earn in the region of £50,000 a year in the education system. I know some professors who availed of the system and are now getting a State pension as well. We should not allow that because we cannot afford it.

We know there are many people unemployed who would do anything to get work and yet there is no incentive to create it. Is the Minister prepared to say that in an extended period we must reduce PRSI or that we should put it all into the one area and leave it as a tax, because that is what it is? The State gets a total of 21 per cent of PRSI between the employer and the employee? That is a lot of money. I know a person who employs two people, one on £90 a week and one on £110 a week, and he pays out £352 a month extra to the State in contributions instead of employing another person. These are the areas I would like to see changed. I would like to see people working. Fifty two per cent of all our people are under 25 years and yet we have no work for them and we are creating no work for them. All we are interested in is getting more money through PRSI and pension schemes so that we can pay out more to people.

The Minister said in his speech that anybody over 60 should not go to the exchange any more, that he should get a pension book. I know people of 60 and 61 years of age who are willing to work. If we are prepared to offer them retirement let us recognise it generally throughout the State. Let us retire teachers, civil servants and everybody else at 60. If we did that we might have people working who are leaving the State at present to work in other countries. Let us not try to bluff anybody, we must still pay out money. Why are we paying out so much money and giving no incentive to people to create work?

Self-employed people will have to pay contributions at a flat rate of £208. There are many people in the self-employed category who do not earn a lot of money but to those earning a lot of money, an annual contribution of £208, or £4 a week, is not a great amount considering the benefits they will get. Those people can argue with the Revenue Commissioners about what money they are making and this could go on for four or five years. These are areas which will have to be watched.

I wonder would the Minister look again at the provision regarding over 56 year olds. He has said that the self-employed person over 56 should not get the benefits because they have not contributed for ten years before pension age. What about the 57 year olds? If they pay a higher amount could some arrangement be made whereby they would get the benefits? There are many people in that category who should be recognised.

Concern has been expressed and rightly so, in regard to the financing of the scheme. I would say the Minister is concerned also and I would not blame him because I do not think this system will work. We are not going to get the full benefit of it unless it is sold properly. The Minister should make no apologies to people in Opposition or to anybody else for introducing the scheme. We should be selling it in such a way that it will be recognised as a good scheme which will benefit people. Self-employed people should not be given the impression that the Revenue Commissioners are going to demand this money. Many people will be very worried about that. I know they should not worry and I understand that but many people do not understand it. If this scheme is sold properly we might gain more from it and it might be well worth it to the 20 per cent of the people when we are talking about.

The National Pensions Board report is a good one. They recommended that the rate of contributions be 6.6 per cent. I would say it should be 6 per cent at least. Is the Minister happy with the 3 per cent he will get in the first year? How high will the cost of collecting that 3 per cent be and how hard is it going to be to get it from these people? There are some people who will pay it, but will the cost of collecting it from other people be very high? There is a very strong emphasis being put on that point. I wonder is it going to cost too much?

I would like to see a levelling out of tax allowances so that people would know exactly how much they have to pay. The Government in Britain have done that in the last budget but I do not agree with the way it was done. Rates of 25 per cent and 40 per cent are not appropriate but they certainly simplified the system. The Minister should ask the Revenue Commissioners to simplify the system. The Minister mentioned Schedule D, Schedule F and PRSI contributions. Why can they not be simplified? As I have said, the PRSI contribution should be included as a tax because it is a tax. We should make no apologies for saying that the system needs to be simplified. I think the Minister would say that himself.

With regard to fraud and abuse is the Minister happy that the penalties are being imposed? Is he happy that the increase in penalties from £3,000 to £10,000 is publicised enough? In local areas where there is fraud could it not be publicised in the same way as any other charge? There was massive publicity at one time about dog licences and they cost only £1 a week, whereas these people are denying the State millions of pounds every year and there is no publicity about it. There should be notices in employment exchanges and Garda barracks stating the penalties for fraud.

Provision has been made in the Bill for the old and the long-term unemployed. There are to be pre-retirement schemes with a view to providing more flexible arrangements. Is it wise to tell a person of 60 to take a pension book? Some people might like it if they were also working in the black economy. It is possible that a person could get his weekly pension while working for two or three days a week. The Minister might tell us how many people in this category are over the age of 60. If there were 12,000 or 14,000, it could mean that perhaps 3,000 or 4,000 would be doing some type of work and it would be more or less legal. I object to this. I can understand that it is embarrassing for people over the age of 60 to have to go to an employment exchange. On the other hand, I do not like the State saying to a person, "Happy birthday. You are now 60. Here is your pension book". Some of these people could be very fit and might, say, get a job working for a member of the family. So many young people are emigrating due to unemployment that we must make every effort to get rid of the black economy and provide them with work. It will be necessary for people aged 60 and over to confirm periodically that they are retired. Of course they will claim to be retired, even if they are working for a day or two.

The Minister should consider a scheme whereby people would be able to work for a certain time each week and still qualify for some form of unemployment assistance. It has been said that this could not be done but it has actually been going on for 30 or 40 years. People who work in the docks, for example, can earn up to £200 for two days' work and still sign on at the labour exchange. Other people who work for four hours per day lose their entitlement to unemployment assistance. In the case of the dockers, it is quite legal for them to claim a tax benefit for the three days on which they are unemployed. There are employers who are prepared to offer temporary or part-time employment for a salary of about £50 per week, but there is so much red tape involved that people are not prepared to give up their social welfare entitlement. This facilitates the development of the black economy and it is a problem we have created.

My suggestion is that each person who is employed should have a job card. If he had two days' work he would take his card to the employer who would credit his card for a certain amount. He would then bring the card back to the labour exchange, just as a docker does. Dockers can earn up to £400 in three or four days, yet they can claim at the labour exchange for the remaining one or two days and also claim tax benefit. We should be extending this system to other people in order to create more jobs.

I congratulate the Commission on Social Welfare on their excellent report. The Minister went into some detail about the proposal to bring the self-employed into the PRSI system. I resent the fact that a person who could be earning up to £40,000 per annum for a 25-hour week can now join the scheme by contributing only 3 per cent and can qualify for a pension. The Minister should bear in mind that other people living alone are asked to exist on £34 per week.

I should like to thank Senator Wallace for facilitating me. The Labour Party welcome certain aspects of this Bill, particularly the positive discrimination in favour of the long-term unemployed. We also welcome the new provisions whereby people can qualify for a reduced rate of old age pension. I have seen some very sad cases involving people who have been just short of the required number of contributions. The Labour Party welcome in principle the extension of the contribution base to the self-employed but we have reservations about the level of contribution sought and the ceiling on the level of income which can be assessed.

There has been a dramatic reduction in the past 12 months in the amount of pay-related benefit which can be claimed by those on unemployment or disability benefit. Several changes were introduced in the Social Welfare (No. 2) Bill, 1987 and in ministerial regulations. One of these changes was particularly reprehensible. It concerned a husband in receipt of a contributory old age pension and a wife in receipt of a non-contributory old age pension. Until the beginning of this year the wife, in the event of her husband's death, could claim his pension for six weeks after the date of his death. That provision has been discontinued.

There is a great more vigilance now about the payment of electricity allowance. I came across the case of a 94 year old widow who had been in receipt of the electricity allowance for some 20 years. This was discontinued because her daughter, who was providing constant care, was in receipt of unemployment assistance, which meant that she should have been available for work. The daughter is 54 years of age and at age 58 she will qualify for a single woman's allowance. At that stage she will get an income which is greater than the unemployment assistance which she is now getting and her mother will qualify for a free electricity allowance. Up to January this year, recipients of unmarried mother's deserted wife's and widow's pensions who were in employment were paid half the rate of disability benefit if they were out sick. This has now been discontinued. Heretofore, maternity allowance was payable if the wife qualified on her contributions on her first confinement and had signed for credits in the intervening time. Under this Social Welfare Bill she now must have 13 paid contributions in the contribution year relating to the benefit year in order to qualify.

There is another departure in the Bill which I find reprehensible and which is causing problems for people. Up to relatively recently if a wife was working and her husband became unemployed, exhausted his unemployment benefit and applied for unemployment assistance, the mortgage payments which that couple might have had were deducted from the wife's income when the husband's means were being assessed. This has been discontinued also.

When Deputy Barry Desmond was Minister for Social Welfare we were the only country in the EC where increases in social welfare benefits were ahead of inflation. The Commission on Social Welfare believe that everybody should have an income above the poverty line and if we convert their figure this would mean an income in the region of £55 per week for a single person and £95 per week for a family. On the other hand, the tax concessions that have been given to people on very high incomes are well in excess of the improvements in social welfare which have been granted to social welfare recipients.

The difference between the urban and rural rates of unemployment assistance is an anomaly which should be tackled and finally eliminated. I want to give an example of a fairly large inequity in this area. I live in the town of Tramore which is seven miles from Waterford, and if someone from Tramore wants to open a claim for unemployment assistance he has to go to the labour exchange in Waterford. He has to pay a fairly sizeable bus fare to travel to and from Waterford. There is no logical or equitable reason why the distinction between urban and rural recipients of dole should continue.

I hoped that the Government, in their policy relating to the budget or the social welfare area, would look at the plight of families who are making mortgage repayments where one or other or both of the spouses are unemployed. Because they are no longer in the tax net their level of mortgage repayments remains the same but they do not get any tax concession. Taxpayers in the higher brackets can get relief on interest up to the rate of 58 per cent whereas these people, because they have fallen out of the workforce, can no longer get any concession from the tax system. I had hoped this would be looked at.

From my experience of dealing with social welfare recipients I believe that the ESB bill which arrives every two months is one of the greatest traumas which exists in their lives. Families live in fear of the time when the ESB bill will arrive. There have been increases in social welfare in line with inflation, and a more substantial increase for long term unemployed people in the Social Welfare Bill, but because ESB costs have been increased by 5 per cent this would seem to be a means of taking money from social welfare recipients in an area where they are terribly vulnerable and which causes horrendous problems for them. Many of these families end up going to their community welfare officer in order to seek funding from the supplementary welfare allowance fund. During the past 12 months the qualification for disability benefit and for invalidity pensions has been increased from two years' contributions to five years' contributions. This is very reprehensible. The point I am making is that the Social Welfare Bill, as it comes before us, far from tells the whole story about what has happened in the social welfare area during the past 12 months since the Government came into office.

We welcome certain aspects of the Bill but we are opposed to both omissions and other aspects of it. It is the intention of the Labour Party to put down amendments on Committee Stage. Other areas of the Social Welfare Bill will be dealt with this afternoon by my colleague, Senator Jack Harte.

Sitting suspended at 1 p.m. and resumed at 2 p.m.

I welcome the improvements the Minister is making on an ongoing basis in the whole social welfare system. The improvements can be expressed in three main areas, first, the increases and the improvements for those who are entitled to and in receipt of benefits; secondly, the extension of social welfare to cover the whole working population and, thirdly, the continuing great work being carried out in investigation and in the control of abuses. Social welfare increases in line with inflation are essential but the increases included in the Bill are, thankfully, more substantial, particularly for those on unemployment assistance and supplementary welfare allowance. In my experience in clinics throughout the constituency these are the categories experiencing the major financial difficulties at present.

Thankfully, the 11 per cent increase in their personal rate and the 6 per cent increase for dependent children will ensure real increases in the benefit paid and in its value for the individuals. Earlier this morning, Senator Cregan referred to the fact that employment may be the responsibility of another Minister. However, the Minister for Social Welfare must finance the unemployed and any changes in employment trends have major implications for a social welfare budget. Unemployment and the plight of the unemployed is a problem affecting many families today. The problem has a two-fold implication, financial and social and I am glad the Minister is continuing the policy of trying to improve both those aspects. From a social point of view, there is no doubt about the effects on a family when the pattern of getting up each day and going out to work is changed to being around the house for most of the time. In this regard, the present schemes for community work, social employment, Jobsearch, part-time allowance, improving educational opportunities and the enterprise scheme to start your own business all provide very important improvements in the opportunities for the unemployed and have allowed for greater flexibility in the whole unemployment area.

All these efforts to help the unemployed are highly commendable. There is more scope for extending the opportunities available and for creating further opportunities in this whole area and because of unemployment, they should be looked at. It is an opportune time for the Government to consider setting up an employment task force similar to the task force set up for tourism which was an excellent idea. Much could be achieved in the employment area by a task force concentrating on job creation. They could be given a specific period, such as three months, to concentrate on examining the vast fields of import substitution, value-added food processing, reorganisation of craft industry and its tourism potential and many possible areas of job creation.

They could also possibly examine improvements and extensions of existing schemes such as making the enterprise scheme more attractive. I appreciate that the Jobsearch programme has arranged a co-ordination of the schemes under both the Department of Social Welfare and the Department of Labour in the interest of the long term unemployed. The IDA specialise in job creation. It could be said that Bord Fáilte specialise in tourism promotion yet since the setting up of the tourism task force there has been a huge increase in public awareness of the importance and value of the opportunities that exist in tourism today. I have no doubt that this awareness will be converted into extra revenue — and indeed into jobs — in the tourism business. This excellent initiative should now be applied to employment creation where vast opportunities exist, particularly in the area of self-employment. Many people have been made redundant in the public service and I hope they will become self employed and create more jobs in different fields. There is expansion and coordination of existing projects and market concentration. I hope that this suggestion of an employment task force could be given strong consideration at this time in view of the fact that in three months thousands of young people will complete their examinations and will be seeking employment.

The introduction in the Bill of a pre-retirement scheme for those in the 60 to 65 age group will be warmly welcomed in that these people will now have a pension book and will not have to queue up to sign for unemployment assistance. I have referred previously in this House to the fact that there are many premises in the country where people have to queue outside, often in very bad weather, and for long periods of time in order to sign for their benefits. This is unnecessarily adding to the trauma of being unemployed. I am very pleased that the over 60s will now be protected from this and I suggest that the Minister consider reducing the age even further to cover perhaps the unemployed over 50, many of whom consider themselves to be virtually retired and not temporarily out of the workforce, which is the qualifying criterion for unemployment assistance.

The major new development of including self-employed and their spouses in the social welfare system must be welcomed as it is long overdue. The fact that up to now the self-employed had to depend on a means-tested, non-contributory pension which was fully paid for by PAYE-PRSI contributors was unfair on both the self-employed and the PAYE worker. The most important aspect of any social insurance policy is that it should cover as much of the workforce as possible, thus ensuring more equity in contributions to social welfare as a whole and providing protection for a greater portion of the population. While not too many of the self-employed will relish the payment of three, four or five per cent contributions, it must be recognised as bringing greater equity to the financing of the social insurance scheme as well as indeed the huge benefit to the self-employed of the right to contributory old age and widows' pension. PRSI for the self-employed will eliminate the means test. In my experience in politics, I have encountered may prospective pensioners who had a real fear of the means test which was a most traumatic experience. Nowadays people have an opportunity of contributing towards a pension and towards their future and giving themselves security in later years. They will now have a right to a pension when they retire as distinct from a concession which had been the case. Thus the dignity of retirement with an income is guaranteed.

Furthermore, the Bill also provides for a pension entitlement for the spouses of self-employed in the event of the death of the insured. Through my work at constituency level I have met many widows who have had to produce an amount of documentation for a means tested widow's pension which for them was almost a double trauma. Thankfully, they will be now due a widow's pension by right in view of the spouse having contributed towards it. Detailed improvements in the Bill such as streamlining of child dependant rates, the extension of co-operation between the Department of Finance, the Department of Social Welfare and the health boards and the rounding to the nearest 10p are steps to improve and simplify the administration of the whole social welfare payment and are welcome. I am satisfied that the provisions in the Bill extend the efficiency and effectiveness of the social welfare system. The work to date for people entitled to social welfare payments, extending the scheme to cover all the workforce and for investigation and control of abuse is all highly commendable. I wish to express appreciation to the Minister for the effective and efficient manner in which he and his staff are dealing with the whole social welfare area. We look forward to a continuation of the improvements, benefits and controls which are now being implemented and leading to a better social welfare system catering for the sector of the population in greatest need.

This is a complex Bill which introduces major changes and reforms in the social welfare system. The main feature of the Bill is to give effect to increases in benefits announced in the budget. Those increases will be paid from July. While increases in such benefits are to be welcomed, nevertheless some of them are insufficient to meet the needs of those who are unfortunate enough to have to depend on them. This morning the Minister told us that a husband, wife and three children in receipt of unemployment benefit will receive an increase of £3.10 per week giving them a total income of £102 per week.

That is the size of my family and I know that £102 per week will not go very far in a family budget when one includes the cost of food, heat, light, rent and clothing. Indeed, we must take into consideration the fact that local authority rents have been increased. Some people may not consider those increases, 50p and £1.50, very high but they will cause a problem for those who must depend on social welfare benefits. The fact that their income will be increased will be taken into account in the differential rent scheme. That will mean that the increase of £3.10 per week will be reduced. I am sure other additional expenses will arise to wipe out the amount of the increase, even if inflation continues to fall.

I am pleased to learn that the personal rate of unemployment assistance is being increased by £4.20 per week bringing the rate to £42 per week. However, we should look at that increase in another way. In my view it would not cover the cost of night shelter in the Iveagh Hostel for one week for a single man. The Government must take that into consideration. The State has a moral responsibility to support those who, through no fault of their own, are in need of social welfare benefits. Recently I detected a change in the attitude of the public towards those in receipt of social welfare benefits. Unfortunately, it is not a change for the good. This resentment against those on social welfare stems from the fact that there are abuses of the system which upset those who make their fair contribution to the State. I am pleased that the Minister has taken steps to deal with those abuses.

This morning he spoke about dishonest employers who allow employees to draw unemployment benefit while in gainful employment. We can be sure that such employers, and employees, are not paying their fair share of tax or any tax. That is their first infringement of the system. If they draw unemployment benefit as well it is not alone an abuse of the system but amounts to stealing from the pockets of their fellow citizens. This morning Senator Cregan, when referring to the black economy expressed the view that it would be difficult to get on top of that problem. It is imperative that we deal with it and I hope the Minister will be successful in eliminating such abuses from the system.

The most significant change in the Bill is the proposal to extend pay-related social insurance to the self-employed. The notion of contributory pensions for all has its attractions but the more I examine the implications of such a scheme the greater are my reservations. The Minister gave two reasons for justifying the scheme. He said it will give the self-employed an opportunity to contribute to their pensions and that it will bring greater equity into the financing of social welfare as a whole. We must ask ourselves if those reasons stand up to examination. The self-employed have an opportunity to contribute to their pension and many of them have their own pension arrangements. To suggest that we need an all-embracing State scheme to give the self-employed the same opportunity to contribute to their pension is not logical. Dragging all the self-employed into the new scheme and making pensions available to those who may not need or deserve them in not necessarily the answer to the problem.

With regard to the Minister's suggestion that the change would bring greater equity into the financing of social welfare I should like to ask him where is the equity when people who would never qualify for social welfare pensions will be brought into the scheme and paid pensions on retirement. The wealthiest people in the country will now be entitled to contributory pensions when they reach 66 years of age. Most of those people did not ask for such pensions which will have to be funded by the taxpayer.

The Minister referred to serious allegations that the Government, in committing themselves to uncertain liability in respect of making contributory old age pensions available to the self-employed are accepting in the short term a flow of money from the self-employed which will be to the fiscal and budgetary advantage of the Government. However, accepting that money in the short term could be a greater liability on the State in the long term. In my view that is a political anxiety.

Most Members believe that the scheme will not be self-financing. Indeed, the National Pensions Board calculated that for a 100 per cent collection the contribution rate would have to be 4.5 per cent and that a 90 per cent collection would mean a rate of 5 per cent. We have not succeeded in getting a 90 per cent collection rate on any of the levies imposed. I wonder if we have a 50 per cent collection on the health levies. Another worry is that the self-employed who might understate their income will when they reach the age of 65, be entitled to a pension at the same rate as those in the PAYE sector who would have made full contributions. That is unjust.

The Minister told us today that the scheme will be reviewed in three years time when a full report from the National Pensions Board will be available. I expect the Minister will report on the scheme to both Houses of the Oireachtas. However, I would prefer if the Minister had an actuarial review of the scheme carried out and would present that report to both Houses. If the scheme is operating successfully we can continue with it but, if not, we can opt out of it.

I can see what the Minister is endeavouring to do by way of this scheme. He is trying to get a certain amount of contributions from people who would otherwise qualify for non-contributory pensions. I do not disagree with that principle but, if that is the Minister's aim, surely a simpler method could be introduced? The present scheme will drag everyone into the net, even the wealthiest people who certainly will not need a contributory pension when they are 66 years of age.

This system will throw a greater burden on the State than the present one. I am pleased that the Minister intends to remove one anomaly which has upset me for a long time. It relates to people who have been in social employment schemes for a long time but who, due to increases in salary over the years, were in and out of the scheme on different dates. In many cases, when their pension rights were calculated over a long period of years they did not have sufficient contributions on average to make them eligible for a pension. However, people who entered the scheme in 1974 for the first time have their contributions calculated over a much shorter period of time and will qualify for a pension at 66 years of age. It would be very unfair to exclude the first group of people while those who paid far less would qualify. I congratulate the Minister on removing this anomaly.

The social welfare system is so extensive that one could speak about it for a long time but I do not want to detain the House. However, I should like to bring to the attention of the Minister the concerns of many of my constituents about the humiliation suffered by them in getting their social welfare payments, especially if their entitlements change. We do not have an opportunity in this House to table questions but I will give an example of an extraordinary case concerning a constituent who applied for an invalidity pension. This is an example of what I mean by the difficulties encountered by people when their payments are stopped or changed.

The applicant was examined by a medical referee who expressed the opinion that the person in question was not permanently incapable of work. The deciding officer then decided that the person was not entitled to an invalidity pension. The applicant appealed the decision and was seen by a different medical referee who also expressed the opinion that the applicant was not permanently incapable of work. The second medical referee asked that the applicant should be referred back for examination at a later date — he specified a period of four months. In the meantime, the applicant requested that his case should be referred to an appeals officer for determination. The appeals officer stated that the applicant should be regarded as permanently incapable of work within the meaning of the Social Welfare Acts and that he was entitled to be paid an invalidity pension subject to the provisions of the Act.

The applicant received the pension book and felt quite happy because everything was now in order. The disability benefit had been changed to an invalidity pension which entitled him to some fringe benefits. His feeling of satisfaction did not last long because the second medical referee who had asked for the case to be referred to for further examination after four months insisted that the examination should be carried out. When that happened, the medical referee decided that the applicant was capable of work and that he was not entitled to an invalidity pension. The pension book was then withdrawn. It is very difficult to explain that kind of procedure. The Department will have to address problems of this kind. There seem to be anomalies in the way different cases are dealt with and my example illustrated this quite clearly. I will send the Minister particulars so that his officials can look into it.

I welcome the Bill as PRSI for the self-employed is a step forward. Everyone will contribute to the cost and will qualify for pensions. When I was first elected, nearly 21 years ago, one of the first resolutions passed at Sligo County Council was that the means test should be abolished. I always felt that it militated against the man who worked hard and who was a credit to his home, family and country. A person like that, who was thrifty and worked hard did not receive a pension when he got old. His position contrasted sharply with that of his neighbour who had a similar sized holding, who decided not to bother working, had the odd drink or two and generally lived it up. He was provided with a home and was also eligible for a pension automatically when he reached the age. I am delighted that this will no longer be the case.

From the point of view of the State, the scheme is prudent because it will collect about £360 million in ten years. It will be a big help to have that kind of money. There is also a specific provision for a review after three years, which is vitally important, because comprehensive legislation can have teething troubles — although they are not apparent at present — and the Minister of the day can amend the Bill.

The scheme will also help to reduce the cost of non-contributory pensions which is now £331 million. At present there is no way of giving temporary employment. In the old days, you signed an X for the days you worked and an O for the days on which you did not work and social welfare was paid for the days you were not employed. If you had 26 stamps at the end of the year you qualified for unemployment benefit for the winter months. The idea was that people went out and looked for work in order to get more stamps. There was an incentive to work but the PRSI system seemed to finish all that.

Temporary work was important in previous years and I believe it is still important today. There are many retired people who could help others by mowing their lawns and cleaning up their gardens. As retired people do not register, people will not take then on in case they get into trouble and, as a result, the more adventurous among them decide there is only one thing left for them to do and that is get involved in the black economy. I think we encourage the black economy. Perhaps, the Minister and his Department could take a look at some scheme which could be introduced in regard to summer work. For instance during a week of good weather a farmer may require three or four men to help him but if it is raining he will not need them. Something should be done to alleviate that problem.

I am very pleased to see the pre-retirement option for the long term unemployed included in the Bill. As we are all aware, there are many people on the live register who are unemployable for one reason or another and because they have not had a job for many years, they have lost interest in working. They are not incapacitated in any way and even though they are unemployable, they still register. There are a great number of our own generation who have little hope of obtaining a job in the future. Officials are wasting their time in sending out literature to these people week after week and they are wasting their own time in having to sign on week after week. They have to go to the exchange twice a week, on the first occasion to sign on and on the next to draw their money. More often than not they will end up in the pub. The idea of issuing pension books is a very good one as, while saving money, it will also give these people back their dignity in that they will not have to go in and sign on. I congratulate the Minister on his forward thinking in this regard.

The concession in regard to the pro rata pensions has been sought for many years and it has never ceased to amaze me that previous Governments never did anything about these. I will not dwell on this matter now as Senator Doyle dealt with the issue very adequately. There are those who when they come to the winter of their lives, despite the fact that they had paid their contributions, do not qualify for a pension. It was probably a matter such as this which prompted Burns to write:

Look not alone on youthful pride

And manhood boyish might

When Man is useful to his kind

Supported in his right

But see him at the edge of life

All cares and sorrows bourne

For age and want

O ill matched pair

Shows man was made to mourne.

I am very glad that this concession will take those who have retired and who have given very valuable service to their country out of that bracket and that they will now qualify for a pension. I congratulate the Minister on listening in the best Fianna Fáil tradition and responding in a very positive manner. This is a good scheme and this Bill deserves all our support and I am sure it will get it.

There are aspects of this Bill which must be welcomed whether someone is a socialist or otherwise. However, there are a number of proposals in the Bill which are a source of concern. Despite the proposals in the budget and in the Social Welfare Bill, the fact of the matter is that social welfare recipients will still live in poverty. There is no doubt that the gap will widen. I am pleased that the recommendations of the Commission on Social Welfare for an increase in the rate of long term unemployment assistance and the harmonisation of child dependant allowances are to be implemented and this is to be welcomed.

I will deal with some of the causes of poverty later on but I would first like to deal with the family income supplement. It would appear that the income limits set down, for example, in net pay terms will result in a lowering of family income. The upper limit for a family with three children is £125 gross and there will be no difference in the number qualifying under the scheme. Gross income provides a uniform measure of family income and to use net pay would, due to the effect of tax exemption limits, various tax allowances and income levy exemption limits, result in different treatment for families who would otherwise have the same gross income. This is a source of concern.

The same would apply in the case of medical cards where the income guidelines are also expressed in gross income terms. Even the family income supplement scheme in the United Kingdom is based on gross income. We feel it should be based on net income and we are particularly concerned about two aspects. First, very few people have made claims to date. I understand that about 6,000 people have made claims whereas the Department expected somewhere in the region of 30,000 people to apply. This may be due to a lack of information on the scheme. In regard to the payment of the increases, many people who could do with this money are going to lose out as a result of the increases not being paid from 1 July.

Before I go on to make my next point I would like to say that I am not trying to get at farmers. I have a number of good friends who are farmers and I know how they think. They are not averse to paying their fair share. I am concerned that we entered into an agreement as a result of the Programme for National Recovery and one of the points in that agreement was that the farmers would pay PRSI at 6 per cent. This Bill proposes 3 per cent which will eventually become 5 per cent. I do not argue about the necessity for economies but I would argue about the way they are implemented. Because of the economic situation the Government found it necessary to produce the Programme for National Recovery and it would be a pity if the Irish Congress of Trade Unions believed that the Government by not imposing 6 per cent on farmers were in breach of that programme. When replying will the Minister make some comment on that?

It is acknowledged that women are at the bottom of the benefit league. Over the years we have tried to draw attention to the plight of two groups of women, including those caring full-time for elderly relatives. Women caring for elderly relatives qualify for the prescribed relative allowance which is to go up to £27.20 per week and it is paid to the pensioner rather than to the woman caring for him or her. That allowance should be increased to the minimum rate of unemployment assistance which is £42.20p. There are only about 2,000 women affected by this. Will the Minister make a proposal in this area before the Bill is finally passed?

The other group are women on separate payments who receive the adult and child dependant portions of their husband's welfare payments. There are about 5,000 such women affected. At the moment a wife with two children gets about £45 a week while the husband gets £37 for himself. This causes severe difficulties in family budgeting where the husband will not share his portion or where the couple are living apart. In the case where the couple are living apart the wife is entitled to supplementary welfare allowance. She has to queue to get her share of her husbands unemployment payment and then she has to queue at the health centre to make up the balance. The total payment is still a pittance relative to what most of society have. The welfare increases for unemployment are tilted in favour of the claimants and the position of these women is worsened. The man will get a £4.20 increase per week for himself and the wife only gets 80 pence plus the increase for the children.

In relation to the urban-rural rates of unemployment assistance, the abolition of the contribution by local authorities towards the cost of unemployment assistance is not a justification for paying lower rates to people in rural areas, which include such major urban centres as Tallaght, Ballinteer, Clondalkin and so on.

I am concerned about social insurance for the self-employed. While I welcome the extension of social insurance to the self-employed, the level of contributions and the exemptions allowed dilute the concept and it may mean that the scheme will lose money for the Exchequer in future years. I can see merit in phasing in the contributions to get the scheme up and running but the final contribution level must be pitched at the level set by the National Pensions Board for the scheme to be self-financing.

The Commission on Social Welfare saw that there would be difficulty in establishing the income of self-employed persons on which to assess contributions and proposed the more penal basic contribution rate of £10 per week rather than the £4 a week minimum proposed in the Bill. This was to encourage early presentation of accurate accounts, arrears, appeals and so on. The exemption of capital allowance pension contributions from the definition of income assessible for PRSI can give self-employed people a reasonably free hand in deciding the level of income. The fairly high percentage of income which can be put into pension schemes tax-free, gives wide scope for reducing the net income figure. The PAYE sector will not be too happy about that.

The prescribed relatives and self-employed people who work in the family business as partners will be exempt from contributions and rights to benefit. This effectively means that spouses, mainly wives, working in family businesses will not get any social insurance cover in their own right. That was highlighted in the divorce campaign. Such women have little or no economic security in their own right on the break-up of a marriage. The net family contribution would be the same if the income were apportioned to the husband and wife but the difference is that the wife would receive cover in her own right. There are a substantial number of points in that area but since most of them have been covered already I do not propose to go over that ground again.

The Bill has some good points and some to which we must take exception. When we come to debate social legislation we are inclined to go a bit overboard in relation to the black economy in so far as we relate it to people who are fiddling social welfare benefits. The black economy also includes those fiddling tax, fiddling allowances, the fellow with the big company car who gets the free meals and so on from the company. Are they not cheating? Social welfare recipients should not be condemned in isolation for fiddling. From what we hear one would think that sin was being committed on a very regular basis by only one section of our community. In fact, a very substantial number of people in the community are committing sins not only against the State but against each other. We should be a little more careful when condemning social welfare recipients. They are not the only ones fiddling the system.

In relation to the question of incentives to work, it is difficult to talk about social welfare recipients in the light of incentives to work. Think of the society we are living in. Through frustration and a sense of remoteness fewer people are voting at elections, either local or general. People are not exercising their right of choice. In the last five or six general elections the people sacked the Governments — I am referring to the people who vote. The small proportion of people who continue to vote probably did the exercise in the right way. The point is that the proportion of the electorate who vote appreciate that there is a choice and those who do not exercise that right of choice have not come to a full understanding that there is a choice and that the choice is theirs. They have not been helped by the failure of the media to bring this home to them or, in some cases, the refusal rather than failure of the media in the context of denigration of the political process.

Of course, as politicians we are not absolutely free. We have a great deal to answer for in respect of the people in our society who are deprived, namely social welfare recipients. Society does not seem to make the choices very clear and as a result we are no longer talking about "them and us". The matter has become so polarised that we are talking about the three "thems" as it were. The magnitude of the choice is not fully appreciated by the people. There is plenty of scope for a choice to be made. Because of the way social welfare recipients are being treated and the way they will continue to be treated the poverty trap will always be there and the same number will remain in it.

People should consider the magnitude of the choices. Because of events and cynical manipulations people probably feel robbed of any real control over their lives. This leads to many abuses not only in social welfare but in other areas too. In the social welfare area the problems are aggravated by redundancy notices which as likely as not can be the result of a smart deal by some slick young man who sees an opportunity to buy into a mixed enterprise or an ordinary enterprise with millions to be made, not for the community but for himself, and not for the national welfare, perhaps by rack renting the property rather than keeping a viable factory in operation.

These elements have a bearing on our society whether we have a black economy of otherwise. For example, a factory producing a saleable product and providing a community with work is dismantled and the machinery is sold before the workers' very eyes and they end up on social welfare as a result. Someone gets a new office block to house new financial bureaucracy and in the process some small shopkeeper quits to make way for a higher rented shop charging higher prices. This stripping of assets is part and parcel of the system and part of the cause of the need to resort to the black economy. I am referring not to people who are doing well but people who are not getting a good deal out of society. I am not making an excuse for them, I am trying to give the reason that leads to such abuses.

In varying degrees we have created this society. Many of us eulogise it to a great extent, therefore the system is playing a big part in burdening the social welfare services with all the abuses society itself creates. The three now polarised parties on the right, the three "thems" and a couple of struggling parties on the left are still arguing about the change in the order of society. As a consequence of all these abuses, the number of social welfare people will increase and a larger slice of the national cake will go to them. Very often many recipients of social welfare have had their lives dictated to them by either a calculation or a miscalculation as to where the profit lies or whether it is a choice between a product and a new technique or whatever. It is a strange world. We do all these things and we back society 100 per cent, but it is not very funny for the deprived. A salesman may devote his life to making people want to buy a product and as a consumer he is pressurised into buying probably the same product, yet somewhere at the back of his mind he would prefer to see those resources devoted to better pensions for his parents or dignified humanity and care for those depending on social welfare services for education etc.

We must be clear in our minds when dealing with the question of incentives to work and the black economy and put them in their true perspective. This is the system we live under, whereby the majority who advocate the system put people into power. Admittedly the people in power do their best here and there to have some checks and balances on the abuses, but that is no good when it comes down to people now in the poverty trap being in the poverty trap for the rest of their lives. I am not a young man and I remember in my lifetime unemployed people standing around corners. The unemployed today do not do that to such an extent. They stood around corners at what is now the Ambasador Cinema — it was then the Rotunda. I can say without fear of contradiction that most of those people went to their graves without having any sort of permanent employment. They were born into unemployment and went to their graves with it. I can say the same about people from Dominick Street and Denmark Street. I could say something about the Liberties too but I am cutting this down because that was my place of origin where I ran on the streets.

What I am talking about still obtains and I am not convinced that anything will ever change it. The numbers will remain, the gap will widen, because there is no real, determined change in our direction. Therefore, there are very serious implications for individuals because we are creating a permanent underclass. We have been working at it since the State was set up. We made some very good efforts in our time to try to create full employment. Just to support some of the points that have been made about redundancy and technology changes etc., an interesting factor is that in the sixties and seventies very good profits were made and very good wages paid but, at the end of that decade, no new jobs came on stream. There was not one more person at work at the end of the decade and we still have the unemployed with us.

Because of the way things are going the better off have formed themselves into a coalition to preserve their position and they ignore poverty. Some of that is attributable to people moving out from the inner city into new homes in corporation developments and families growing; where there was no car, there are now two cars and so on. This has happened over the years and looks as if it will continue, and the social and economic divisions have hardened.

There are things in this Bill to be welcomed, the 11 per cent, the 7 per cent. While they are welcome they will not lift people out of the poverty trap. The fact is that what has been a marked feature of Irish society for some time now is becoming more pronounced. The 3 per cent increase will not do the job the Government believe it will do. It will not bring people out of the poverty trap which should be our minimum aim.

We create a system; we back it up by all the things we do. We drive people onto the unemployment market. We are not in a position to create jobs for them. There is a vaccum which has to be filled. People who have been used to good earnings and are now deprived have to resort to the black economy. People who are not deprived also resort to the black economy because the system encourages it. The American mentality of some years ago, making a fast buck, becomes sacred and consequently the less well off in society are ignored. The better off form themselves into this coalition to preserve their own position.

The Labour Party will certainly not be voting against the Bill because the fact is that people must get their increases and their benefits. I trust that the Minister will take these criticisms in the spirit in which they are made. I know what argument I am going to get back because I have been getting this argument for years, that everything is being done to create jobs. I hope my younger son who is 33 years of age lives to see it. I hope I live to see it. If I thought I would live long enough to collect the bet I would put a few shillings on it now. Unfortunately I think we will see the widening of the gap and the unemployment figures rising.

I will just make a brief contribution. Most of the points for and against this Bill have been dealt with by other speakers. In this Bill we are dealing with a category most deserving of our time and our actions. Anyone living on social welfare is in a marginalised class; they belong to a poverty culture, a group of people in our society for whom life has become more stressful, more difficult, who must live within a framework of a very limited budget and cannot and do not enjoy any of the even small extravagences or frivolities that life for those of us who are on earned income can enjoy. Their lives become mere existence in many instances from one social welfare payment to the next. As well as having to cope with an income inadequate to their needs, they live with the realisation that nothing will get much brighter in the near future.

In this Bill we are dealing with pathetic margins of increase, that is, excepting the 11 per cent increase for the long term unemployed. Indeed, the amounts are so meagre when one looks at them added up that one wonders if they will make any difference at all to most families. They are in stark contrast to the largesse that is distributed elsewhere. For instance, I saw a report recently that £80 million is being borrowed to give bonuses for early retirement to public servants. These are workers with good pay, good conditions and guaranteed index-linked pensions and I believe instinctively that the programme of lump sum payments which has been agreed is very difficult to justify in the face of the economic difficulties faced by people who are on social welfare.

While I regret the low overall increases, there are factors in the Bill which have to be welcomed. The simplification of the child dependant allowance, for instance, is certainly a welcome move. I would add a rider that the Minister should at this stage come out with one flat agreed rate because if we look at the criteria on which we base the child benefit, it has to be the same for all children; all children have the same needs. We should have just one category of child benefit for all children.

Further changes in section 30 mean that this very anomalous situation which most of the Senators have commented on will be corrected under which those people who were disqualified from getting old age pension and widow's pension are now to be brought into benefit. I will speak a little about that later.

I share the concern that has been expressed here and in the other House about the introduction at this time and in the manner in which it is done of the pay-related social insurance for the self-employed. Frankly, I believe it is destined for trouble. All the indicators now are that there will be difficulty in collecting this 3 per cent — in the first year — of reckonable earnings. We have classic examples of the difficulty various Departments have had in collecting levies of various sorts in the past. We know that the farming community, for instance, owes in excess of £5 million on the health levies. There cannot be any great optimism about this scheme and I know there is a requirement that there should be a 90 per cent to 11 per cent collection rate.

The objective of this proposal is to provide a pension as of right for the self-employed. At present self-employed people on reaching the age of 66 may qualify for a non-contributory old age pension. This is subject to a means test. Some qualify and others do not. It is, by and large, dependent on their means. The idea of providing pensions as of right seems like providing pensions for people who do not always need them. There are considerable and serious implications long term for the Exchequer in the measure proposed in this Bill and fair warnings have been given to the Minister in the other House in this regard.

The mathematics of the proposal have been spelt out and I hope that on reexamination there will be a better way for dealing with the self-employed. We are in an unfortunate position here in that all pensions in the social welfare category are paid not from a fund as they ought to be but from current taxation. This will prove more and more costly as the years go by. Many people in the workforce who are contributing fully to PRSI are sceptical about the future of their State pensions. We have, in my opinion, far too great a reliance on this pension and not enough on private pension schemes. Of course, the vast majority of people in employment belong to occupational pension schemes but, in many cases, these are far from adequate for their future needs.

We are now beginning to see, I am glad to say, a new growth in awareness about pensions. This is helped by the increased emphasis, only in recent years, on financial services and long term investment as we see banks and building societies developing into the pension investment area. It is good for people and good for the country to have long term investment in pension bonds and policies. We need to encourage this trend and make people realise that they will need more than a State pension in 20 or 30 years' time to have reasonable comfort and security in their old age. I propose that the self-employed should be encouraged to become contributors to the social insurance fund like voluntary contributors instead of this scheme.

I would like to comment on one section of this scheme about which I am not clear. It relates to the £104 flat rate contribution which will be payable by persons who are not being regularly assessed for income tax. The Minister stated that:

On the basis of information on their income supplied ot the Revenue Commissioners, the persons concerned will be formally notified that they are not required to make a return on their income but that they may be liable for the £104 contribution.

I suggest that these people will be on a very low income and it may even be seasonal income. They may have that level of income one year and not have it another and have it again the next year. If they are to be levied for £104 which for somebody on a very low income is a lot of money, what will be the outcome for those people? How will the Minister decide on their qualifying level? I am concerned about that group.

Section 5 deals with the family income supplement. There is some concern about this payment. I have the combat poverty pre-budget submission, December 1987, on this matter. They said the following:

The Family Income Supplement also needs to be reviewed. That it has failed to achieve anything like its projected take-up is now well known; only about 6,000 families currently avail themselves of the Supplement, whereas the expected take-up was 35,000. The Agency welcomes the commitment in the Programme for National Recovery to examine the Supplement. The low take-up must reflect problems other than lack of notification or poor public knowledge about it. In the agency's view, the level of compensatory payment available under the Supplement must also be considered as a factor affecting the take-up.

The Minister said he has a review in hand. I hope this will be completed soon and that will have a better take-up of this supplement. It is a very worthwhile scheme and it works as an incentive to those in the labour force who are on low incomes. It ought to be promoted through all possible channels. It is an incentive to go on working as against some other parts of the social welfare scheme which tend to be an incentive to people not to work. This is a move in the right direction.

Section 31 provides for the provision of transfer of information between the Department of Social Welfare and the Revenue Commissioners. I have no doubt that this is a good thing. It will lead to more efficient administration and better access to information across the departmental fronts. However, I hope it will not herald the start of a witch-hunt of social welfare recipients and load more stress and tension on these people than they are already experiencing. The Minister's objective must be to stamp out abuses in social welfare, to catch the rogues we all hear and read about, who work full time and collect social welfare for their drinking money or their pocket money. These people in all justice must be apprehended.

I would be concerned about the man or woman on long term assistance who may make a few pounds on the side and does it in the hope of developing real work and getting back to being self-sufficient. I know of one case of a man who had been ill and was on assistance and supporting his elderly mother. He did some gardening work during the summer. Senator Farrell referred to something similar. He earned very little but had hopes of improving and, in an effort to do so, he put a small advertisement in a local newspaper.

One evening he got a phone call from somebody who claimed to be from the Office of the Revenue Commissioners who asked him very pertinent details. The person on social welfare did not give out much information because he was very shocked and upset. He was told by the caller that he was not paying any tax and that he had committed an offence for not making returns. He then made an appointment to go out to the man's house on the following Friday to sort it all out. It had a devastating effect on the social welfare claimant. He is a sensitive man, prone to depression and he got deeply distressed at the thought of what might happen. Someone told him he would summarily lose his assistance and this caused him great distress. It was discovered that it was a prankster who made the phone call and not somebody from a Government Department.

The effect of this on this man made me realise how awful it must be for people who are basically honest, decent and trying to improve their lot but who are caught in the net. They possibly do all kinds of things which make them even more suspicious. By all means pursue the abusers but I hope it will be done in a concerned and sensitive way because most people on social welfare are honest, and will not defraud, and should not be made to feel like criminals.

One has to be pleased about the changes in section 30 and this was also mentioned by other Senators. I note that it covers only 1,250 persons. I could not find the cost of introducing this benefit. Several couples have come to my clinics over the years about this matter. In most cases they were more worried about the lack of a widow's pension than about the old age pension because many of them would have had occupational pensions, from the man's job, but there would not be any survivor's benefit. These couples pleaded with me to see if anything could be done and they went to the Ombudsman also. In the event of the man's death the woman would be left with no pension and no income. She would have had to be means tested but this will make it much easier for people and will relieve them of much worry. They could not understand the injustice of this which put them at a less advantageous position than people who had made fewer contributions.

I would like to refer to the conditions attached to obtaining payments and the official face of the Department of Social Welfare. Apart from the lack of privacy and the clinical atmosphere in many employment exchanges, the services are alarmingly complex and confusing. I will refer again to the Combat Poverty Agency's submission in which they detailed this matter very clearly:

The Department of Social Welfare's organisation and delivery of services has improved considerably in recent years. The setting up of the executive office — the Social Welfare Services Office — and the application of information technology have enhanced the Department's capacity to cope with the increasing volume of payments while maintaining very low administrative costs...

Despite these changes a number of barriers and anomalies continue to hamper the efficient operation of the social welfare services... The welfare service system continues to be alarmingly complex. In this regard the fact that the Supplementary Welfare Allowance is administered from outside the Department by eight different agencies may lead to inefficiencies. The possibility of inconsistencies in the scheme is also large, given its high discretionary element and the fact that there is no formal monitoring procedure involving the Department and the executive agencies. Relatedly, the duplication of means testing is both wasteful and distressing for claimants. To tackle these kinds of problems some form of localisation of service delivery, perhaps in the ‘One-stop Shop' form suggested by the Minister for Social Welfare, may be helpful.

They further deal with the need for more information. The need to increase the responsiveness of the service to the needs of the consumer is a key priority, and a central element here is the provision of adequate information to applicants. In this regard the Department's new guide is welcome, but the notification procedures traditionally relied upon by the Department — information leaflets, booklets, posters — in some public officers are not sufficient. The community information centres have an important contribution to make in providing an independent information advice and referral service to welfare claimants. I know that the Department provide a range of information literature and I appreciate the difficulty in keeping it updated and keeping it current with the various increases and new initiatives that are happening. However, I have to say where concise, clear information is provided it is absolutely snatched up by people who need it. I had some experience of this when I was in office, and in response to a need I brought out a booklet called The Widow's Booklet, a little blue book which brought together all the information that was necessary for a newly bereaved widow. It was extremely popular, useful, and it was free, which is, of course, essential. These information booklets and literature must be free.

There is just one other area I would like to mention, and which again has been touched on by another speaker, that of the wife dependant. The present dependent ratio for a woman who is claiming from a husband who is the beneficiary is .6 of the main payment. This causes great difficulty when the woman and her children are separated from the man. I know this has been said before and that the Minister is aware of the problem, but it is totally inadequate for a woman who has to move from the family home and rear the children on her own. She is not able to do it. I think that perhaps the separated wife and her children should be categorised in a different way and given a more substantial payment.

The Minister has a difficult job to do, with many calls and many criticisms, and I do wish him well in the future, but I make a special appeal to him to continue to try to humanise the system and not just allow it to deal with the facts of economics and planning.

I thank the Senators for their wide-ranging contributions to the debate during the day. I will try to deal with some of the points which were raised, obviously they overlapped to some extent and here again I thank the Senators who spoke in the latter stage for doing their best to avoid overlapping in any way. That was obviously very helpful in terms of the time taken.

Senator Cregan raised a variety of questions. He spoke in particular about the family income supplement. He said he was concerned about incentives. It was Senator Fennell who recognised the fact that the family income supplement is an important incentive to people at work.

Senator Cregan mentioned a worker on £100 a week with three children: they can get £27 family income supplement. It is a real incentive. It is a £27 supplement. If that family had five children, they get £44, which is very substantial. He seemed to think it would be embarrassing to go and collect this income supplement and that it would have to be collected weekly. There is no embarrassment involved at all. There is a fairly simple form which is filled in and this is easily checked in Social Welfare because there is information on children's allowances available. I know a number of people who have participated in the scheme, they found it fairly easy to become involved; they get a family income supplement book, which they have for a year, so in that sense it works very simply.

We are reviewing this matter now and in an amendment to the Bill in its passage through the Dáil, I did take power to make changes. A number of Deputies, including Deputy Mitchell and Deputy Bell in particular, suggested that there might be a need to extend the scheme beyond five children; it only goes as far as five children. I had a fairly quick look at the problem but found that it was much more complex when you went to adjust it quite so simply. We ran into difficulties when comparisons were made with other people at work at certain levels. What we did was to include an amendment which allowed me, as Minister, to make variations, to vary the number of children above five in the first instance, and also to make other variations, which is a power which was not included up to that time. Now it is included and I will be able to do that by regulation.

We hope in a reasonably short time to have the results of a review that was done by a consultant. This is a detailed and fairly intensive study of the family income supplement scheme as a whole, with information on it since it began. Following that we plan to redesign the scheme for further use. The previous Government started at 25 per cent of the difference between the two figures, then went to 33? per cent as another means of altering it; when we came in we went on to 50 per cent, which is what it stands at now, 50 per cent of the difference between the two figures. After that we were not too clear what was the best way to proceed. This study will be available reasonably soon and we will then be in a position to have a good look at it. I should say to Senator Cregan that it is an important incentive. It is valuable and important in that sense and does help in cases where people are at work and on low incomes. I would be reluctant to make the payment to the employer instead of to the person concerned. It is preferable to give it to the person concerned. It might open up much more possibility of abuse at the employer's end because an employer might say: "I do not need to give this person an increase because they are getting other money in addition." That would be my initial reaction to a suggestion that it might be paid by the employer in the first instance and in that sense controlled by the employer.

Senator Cregan also was concerned about the old age pensioners having a fairly good level of payment. This is something we have been reasonably proud of. It is very interesting to find that by comparison with the United Kingdom our rates for elderly people are very good. Generally we do well for our elderly people. On a recent visit to Northern Ireland I had a meeting with the Minister, Mr. Needham, and one thing that was very clear was that we look after our elderly people well. We have worked hard at this over the past number of years, and particularly while I was involved earlier in 1980, 1981 and 1982, we increased those pensions by 25 per cent in each year, raising them to what we regarded as a reasonable level. That is why the 3 per cent applies across the board, to maintain that level and to ensure that the level is maintained and not slipping back. I would say that the Coalition Government which preceded us immediately, likewise maintained that level during that period. I think that was right and we plan to do the same thing.

Senator Cregan suggested that old age pensioners eat less; that is probably true, but at the same time they need more heat. Anyone who is involved on the ground will know that their heat requirement is very much greater, and they need more care generally. They are doing reasonably well at present and we want to keep them in that position. The emphasis has to be on the people who are at the lower levels particularly the unemployed who are at such a disadvantage. All the Senators have mentioned this point.

I usually listen to what is said, although I might not always be able to do what is suggested, but this time we have been able to give a substantial increase to the unemployed and to those on supplementary welfare. It would have cost £23 million in a full year to give a 3 per cent increase to those groups but this increase will cost £53 million in a full year. It is a sizeable transfer in the current circumstances. I know that as soon as I say that, someone will say that if we did all sorts of other things we could have more money. Things are never quite as simple as they appear in the first instance. We are now widening the base there and it is amazing how many people seem to see difficulties with it. Of course there are enormous administrative and initiating difficulties and I recognise that but the Government have been very wise in their approach to the question. By and large Senators recognise and accept the need to phase the scheme in over a period. That has generally been accepted as a good approach on the part of the Government. They gave deep consideration to that whole question and felt that on balance that what they are doing is the right thing at this time.

Several Senators, including Senator Harte and Senator Cregan, raised the question of the cost of this scheme. There is no doubt but that after ten years the State will be £360 million better off as a result of this scheme. The question is what will the position be in 40 or 50 years. Why does everybody get so excited and worried about today? If we were talking about the PAYE payer and the ordinary employee nobody would worry about what is to happen to them in 40 or 50 years time — people would look at the position this year and make sure the situation was balanced out in the present circumstances.

One matter that came up again and again was the National Pensions Board report. The board did an excellent job and produced a great report. I asked them specifically to set aside other things and to take this question of the self-employed and act on it now. In 1976 we had the first report and in 1978 we had the report on the self-employed. In 1982, when I was Minister, I prepared a draft national pension plan and had a White Paper ready at that stage. Nothing has happened since and the matter was not proceeded with further. The National Pensions Board were set up in the meantime. To introduce an all-embracing national pension plan would be a major step. Instead I decided to tackle the self-employed aspect of it now. We can define it reasonably well and take it as a priority. The board gave their commitment and time to the work on that and did exceptionally well. They came up with an actuarial study which was done by the best experts in the country. They are as good as experts from any other country. Any economist who takes a pot-shot and thinks that by writing some sort of a paper in a day he is matching the expertise of these people is just talking nonsense and rubbish and we should not even listen to him. These experts did a thorough job and carried out a first-class actuarial study.

That is one side of the coin, the side which relates to what the costs are likely to be, the number of people, the number likely to die and the people who are likely to demand the pensions. That is the actuarial study and one side of the balance sheet, as it were. We have the best information available on that and we are not going to get any other information in two or three years time. That will be a lasting study for a number of years ahead. We could do another study in the future but it would have very little impact unless it was done in five or ten years' time when it might be refined.

Questions arise on the income side. It is important to keep the two things separate. There is no disagreement among experts about the whole actuarial side, but arguments arise regarding the income. The National Pensions Board, in their study, had limitations in that respect. All they could say was that if we had a 100 per cent collection rate — there was no point in them taking a 90 per cent or an 80 per cent rate, they had set it up as a model — we would need contributions of 4.5 per cent, on the income base they were talking about, to break even. The Exchequer would gain on anything above 4.5 per cent with 100 per cent collection, not necessarily from everybody but from the people who would normally be liable to pay. Some people who would not normally be expected to pay are being excluded. If we collected from all the people who are liable to pay, we would need a contribution rate of 4.5 per cent to break even. The lower rate of £208 is a minimum.

The National Pensions Board produced a report and then the Government had to decide what the rates would be and how to handle them. The Government went to the Revenue Commissioners because they are the people who are the real experts on income and where it will come from. Everybody knows that the Revenue Commissioners give conservative estimates about everything. We are very familiar with that. There are no better experts on estimating anything than the people in the Department of Social Welfare. They are doing so day after day, year in year out. They can tell you what happened back in 1932 or in 1945 because they eat, live and sleep social security systems and estimates. Look at how close they get their estimates every year at budget time.

The Social Welfare people and the Revenue Commissioners put together their best estimates and then a couple of changes took place. The Government wanted to make sure that the base was broad enough. As some Senators have said, some people might avoid paying in one way or another. There is the question of capital tax allowances, the income as assessible for tax under the Programme for National Recovery. People could buy more things and make sure they paid nothing. Therefore, we had to make sure that we picked the lowest figure. Secondly, people could shift income into rents or dividends.

The Government then decided they would have to include unearned income. There is a difference in the figures because the base is being broadened by well over £200 million, up to £250 million, as against the study done by the National Pensions Board. I trust that Senators understand we are broadening the income on which we are basing the rate. We are making the income levels more solid. In addition, the Government decided there must be a whole new collection system. The new system will unify and integrate tax collection for the self-employed with PRSI, health and other levies. That is a huge administrative change and that will have a tremendous effect. I know, from my experience in dealing with accountants, that they are forever asking when we are going to put this together. When they are presenting documentation for an individual they just present it for the tax and they leave aside the PRSI. Nobody subsequently has the time to chase it up. They are never really pursued. The Revenue Commissioners will admit that because the amounts are much smaller than the tax amount or the VAT amount they cannot devote the resources to pursuing them. The system is now being unified and the same penalties will apply as to general taxation offences.

This is a major administrative change which will bring about major improvement in the rate of collection. In addition, the ceiling has been raised from £15,500 to £16,200. Given these factors the Government decided that the rate of 5 per cent would be sufficient to give some gain to the Exchequer. It was decided to let it run for three years and then to conduct a review. This reasonable approach also allows a phasing-in period.

I do not share some of the fears which have been expressed. People will not say directly that they do not want to pay PRSI and would rather look after themselves. Instead they talk about the cost to the State and the various problems in administration. That has been going on for too long and we are now facing up to the matter by bringing the self-employed into the system. It is a major task for the staff of my Department and for the Revenue Commissioners and I pay tribute to the work they have already done to ensure the success of this scheme.

Senator Cregan referred to the pre-retirement allowance, about which he was not enthusiastic. The purpose is to give dignity to people over 60 years of age who are still seeking employment. In current circumstances opportunities for employment at that age are very few. We are talking here about those on long term unemployment assistance. The numbers involved on the full rate amount to fewer than 3,000. If we were to take in all those on unemployment assistance in that category, the number might be up to 5,000. We must be prepared to try new schemes. If there are problems they can be considered. It means that people will get the same allowance as at present but they will get the money in bulk instead of having to queue and sign on. The staff of the Department make every effort to avoid the necessity for queuing, but very often people want to collect their entitlements at the same time. People often prefer to come early in the morning since this leaves them free during the day.

Senator Cregan mentioned the inclusion of people over 56 who would get a means-tested pension. Many of those he mentioned would not qualify for such a pension. The main problem is one of cost and it is not possible to widen the scheme to that extent. We will be carrying out a special campaign to inform people about the PRSI scheme for the self-employed. Leaflets will be prepared for several categories. Senator Cregan can be assured that this campaign will begin following the passage of this legislation.

A large proportion of the £331 million which is paid out in non-contributory pensions goes to self-employed people who have never contributed. Some of them may have contributed at certain stages during their working life. A farmer might be well off but when he transfers the farm to his son he is left without any money and thus qualifies for the means-tested pension. People tend to forget when they give various figures relating to this scheme that this £331 milion will be absorbed.

Several Senators referred to the fraudulent abuse of the social welfare system. There is no point in denying that fraud is reasonably extensive. We must always be conscious of the fact that people are due their benefits and this puts us at a disadvantage in relation to anybody who is defrauding the system. We have an onus to ensure that people are looked after properly. The system is so large that the amount of money obtained by fraud is also very large.

Last year there were savings of over £40 million in my Vote. A saving of about £10 million was due to people taking up courses under the Jobsearch programme, although this was a cost on the total system. About £3 million in PRSI payments was recovered. That reduced the sum to about £27 million. At the end of the year I was able to continue alleviating payments, to pay the Christmas bonus and to meet a number of other expenses without having to go back to the Minister for Finance or the taxpayer. Obviously, those kinds of savings are very important and we have to pursue them. Indeed, in that respect some comments were made during the past few days about the North Cumberland Street employment exchange Comments were made about the claimants who were questioned about whether they were available for work. I want to be quite clear about what happened in that case.

The North Cumberland Street employment exchange deals with about 16,000 beneficiaries of unemployment assistance, of which 6,000 are postal claimants. Because of computerisation, the 6,000 postal claimants for the Dublin area are based in the North Cumberland Street exchange. Because North Cumberland Street covers all the postal areas it makes it look somewhat different from other exchanges. A parliamentary question in relation to that subject was raised in the Dáil. That note was put with the answer but was apparently ignored by some people in the media, perhaps for other reasons. The people who tried to create a scare about the North Cumberland Street exchange suggested that there was something wrong going on there but, in effect, all the Dublin postal claimants go through the North Cumberland Street exchange and they were just being reviewed. The postal claimants in Dublin had not been reviewed for a long time. One of the reasons for this review is that computerisation has freed up some staff and made it possible to have a normal review, with all the normal processes.

About 800 claimants were reviewed and of these over 33 had signed off, 312 were disallowed and 180 appealed. Those appeals will go through the normal process. It is the deciding officer who decides in the first instance and the appeals process is there as a follow on. Many of these people had been drawing benefit for over five years and some for even longer. In many cases the claimants had special skills and it looked as if they might have got some work during those five, six or seven years. The Department have a responsibility to review those cases and to ensure that they are reviewed in the normal way. Because the administration was not able to carry out a review previously, it may have come as a surprise to some of the postal claimants that there was to be a review. The people who come in on a regular basis are used to that kind of review. I should like to assure Senators and others that there is nothing special or unusual about that review; it is the normal review process which applies throughout the whole country. The only difference on this occasion is that the review applies to postal claimants outside the six mile limit but the normal procedures for deciding officers and appeals officers applied. It is part of the ongoing administration process in the Department. It was suggested that there was a special direction about the review. There was no special direction; it was just part of the normal process. We have an obligation to ensure that people concerned have the same opportunities for social employment schemes and other schemes as have those who sign on regularly at other exchanges.

Senator O'Shea welcomed a variety of steps we are taking, as did most Senators. He referred in particular to the minimum rate and suggested that we should be getting to the minimum rates recommended by the Commission on Social Welfare. The Commission on Social Welfare recommended that we should go as quickly as possible to a rate of £45 per week for people on unemployment assistance. In today's terms that would probably be £47.20 of something of that order. They recommended that we should get to that as quickly as possible. By going to £42 we are going a fair step in that direction. In the longer term they recommended that we try to get up to £55, which is the figure Senator O'Shea mentioned.

Senator O'Shea was worried about the continuation, for six weeks afterwards, of the payment to the widow of what the husband had been receiving. The change that took place at that time gave the same rights to men as women. It did not apply to men previously so it was the other way round this time. This was due to the fact that men can now be dependants. The dependant now can be either the wife or the husband. The other point Senator O'Shea seemed to miss is that when a wife subsequently gets a widow's pension the amount she gets for the six weeks is deducted from that. This is a means of giving an immediate payment and keeping that payment going for a time.

Senator Wallace felt that the pre-retirement scheme was particularly welcome. She referred to the trauma of queueing in employment exchanges and to the difficulties experienced. She suggested that we should consider going below 60 years and she spoke about going down to even 50 years. I will bear in mind what the Senator said but 58 years is the figure that would come to mind because that is the level at which the single woman's allowance comes in. Basically the scheme was introduced to bring in those people over 60 years.

Senator Doyle referred to the change in the public mind and felt that it was due to the abuse by those people who take money from the pockets of fellow citizens. That is understandable. More people ring the Department of Social Welfare nowadays to tell officials about fraud or abuse. They see it as their civic duty to do that and, as a result, more abuse is detected. Senator Doyle was anxious that people would be looked after and not be hounded in any way. I can assure him that it would not be my intention that people be hounded.

The Senator felt it was not logical to extend PRSI to the self-employed because these people could make their own arrangements. I do not think that is logical because we know from experience that people have not been making their own arrangements. They might make arrangements one time but not the next time and the net effect of this is that the State is paying out £331 million. It is strange that we are practically the only country in Europe that does not have the self-employed included in its social security system and contributing and benefitting like everybody else.

The other point I should like to make in relation to this is that we are only providing a basic pension. There is no topping-up pension involved. We are providing a basic pension across the board and it is open to individuals to make their own topping-up arrangements. That is the normal procedure and it is the way it will develop. Those who are better off can make their own arrangements to top-up.

The Senator spoke about political anxiety, the 4.5 per cent and the 100 per cent collection. In particular, he welcomed the pro rata pensions and went on to mention an extraordinary case he was dealing with and said he would send me the details. The thing I would like to emphasise here — and it relates back to the allegations made about the North-Cumberland Street exchange — is that this system is separate. Those people make their decisions on a statutory basis. If we find there are any patterns there and we do not like them, we can say we would like to know how things are being done.

We must have a system that is independent of the political system. Basically the deciding officer makes his decision independently and the appeals officers work independently as well. Senator Doyle illustrated the point that the appeals officer made his decision notwithstanding the decision of two medical officers. He made his decision on more global grounds, accepted that the person was entitled to invalidity pension. The fact that the person was called back for another medical examination by the second medical referee is an aspect about which Senator Doyle was concerned. I will certainly look into it if the Senator provides me with the details, as I think he plans to do.

Senator Farrell did not have any doubts about the scheme for the self-employed. Over the years he has seen what happened and he was very happy to see the scheme going ahead. Senators and Deputies come across many cases of people who leave their employment as PRSI employees and set up as self-employed persons. They work very hard, but their businesses do not do very well and they could have a heart attack and die. Suddenly there are widow's but no widow's pensions. There is no basic level to cover those people. Very often all their assets have been put into the business to try to make it successful.

Everything would have been all right if the husband could have kept going until the business was up and running and he could have afforded to put some money away to build up good pension cover. A report produced by doctors showed that a fairly high proportion of them did not provide any cover for themselves independently, and consequently for their wives or dependants. The more we look into it the more we find that there are many exceptions within the system, and that is what leads to a cost of £331 million per annum. It is better that people should pay when they have the money so that they are covered when they do not have the money.

Senator Farrell wanted us to go back to the old days when we got stamps for the days worked. I will look at that. There is provision for what Senator Farrell is saying but what may be happening is that the cases may be followed up too closely and there may not be sufficient flexibility in the operation of the scheme. On a previous occasion Senator Farrell mentioned the little boxes. I admit there used to be Xs and boxes. It was a very simple system, but the Xs and the boxes are still there today, not withstanding the computer system. Problems arising in practice and several Senators mentioned the same sort of problem and difficulty and these difficulties arise in the operation of the scheme. We will see if these cases are being followed up so closely that people are being frightened off because they are afraid they will not be let back into the scheme. We will certainly give that some attention.

Senator Harte recognises that, notwithstanding all we have done, people will still remain in poverty. The Senator will appreciate at this stage that we have tried to tackle some of the problems, but will not be able to tackle them all at the one time. We recognise that there is a lot more to be done. I do not think the 5 per cent would be in breach of the Programme for National Recovery and the agreement. The people involved recognise very clearly the efforts that are being made at the moment to bring in a system which is based on income assessed for tax. It is for the Government to work to get it right and that is what we will be doing.

Senator Harte and Senator Fennell mentioned women on separate payments. That is a problem in the system at the moment, but it derives from the fact that the woman is a dependant of the husband and obtaining benefit in that way. Senator Fennell suggested that there might be another scheme with a separate allowance.

As regards the rural versus urban rates Senator Harte also spoke about, it is just a question of cost and time. I would like to be in a position to do as he suggested, but it is largely a question of cost. You can bring out all the old arguments for rural versus city but the cost will have to be addressed in future. It certainly is something one would like to be able to do.

Senator Fennell started off by saying that anyone on social welfare is marginalised. I know what she means, but if she reflects a little she will realise that that is not necessarily so, because we pay a lot of old age pensions or widow's pensions to people who have second pensions or, who may be back at work in the case of a widow. Sometimes when people quote, they give the global figures. In a full year the increases come to £101 million, a substantial figure in the current climate. In economic terms we have more than maintained the value of all the benefits and we have targeted the resources to those who are most in need. We have gone a long way towards rationalising the child rates. If we are to ensure that nobody will lose out at any level, there will be a sizeable cost involved, and that is the restraining factor. We have brought it down to 2 per scheme instead of 4 per scheme and I will be trying to simplify that further in future.

Senator Fennell also talked about PRSI for the self-employed and the idea of a pension as a right for them. We have to bear in mind that this is a basic level of pension. It will not be an enormous pension. It is providing a basic pension as a right across the board — everybody in, everybody contributing and everyone benefiting and after that people can make their own arrangements. If a person has a second pension, is well off or has means, one levelling factor is income tax. In any modern developed country, particularly in Europe, there is a basic level of pension provided by the State, and the individual makes his own arrangements for a further income.

Senator Fennell asked about the £104 rate and exactly who gets it. They are mainly people on lower incomes, but not as low as £2,500, which is the excluding rate. Basically, they have an income and/or allowances but do not pay tax — or do not pay it very often. From the point of view of the calculations by the Revenue Commissioners it is preferable to have a low rate. The same applies in other countries. It is one of the quirks of the system when dealing with the self-employed.

I was asked about the transfer of information. The first problem in regard to that is that we cannot operate an arrangement for the self-employed unless we have a transfer of information. I was asked about the need to localise the services and I should like to tell the House that it is my objective to localise them as much as possible. Such a move would solve many problems. However, I should like to ask Senators to bear in mind that that cannot be done overnight and that many facilities will be required. It will also be necessary to bring officials from different Departments together. I am committed to that programme and I hope we will be able to make progress in that direction.

I should like to thank the Senators who contributed to the debate. When the Dáil or Seanad deal with any question relating to social welfare Members raise many problems on behalf of their constituents. They make very searching contributions to such debates. I should like to assure the House that I will be giving attention to all areas of social welfare. I regard the extension of PRSI to the self-employed as a major development. The scheme has been throughly researched by those in the best position to judge it. I am confident that the scheme will prove successful although I realise that we will have teething problems at the outset.

Question put and agreed to.

An Leas-Chathaoirleach

When is it proposed to take Committee Stage?

It is proposed that the House should adjourn now and that Committee Stage be taken on Tuesday, 29 March 1988 at 11.30 a.m.

Committee Stage ordered for Tuesday, 29 March 1988.
The Seanad adjourned at 4.15 p.m. until 11.30 a.m. on Tuesday, 29 March 1988.