The annual Social Welfare Bill is the most important piece of legislation to be debated in the Houses of the Oireachtas each year. The measures in the Bill affect 822,000 social welfare recipients and their 627,000 dependants, accounting for over 40 per cent of the entire population.
The purpose of the Bill before the Seanad today is to give legal effect to the increases in social welfare payments announced in the budget and to provide for other improvements to strengthen the social welfare code for families, workers, carers, lone parents and others who rely on social welfare. The total cost of these improvements in a full year is £168 million.
I introduced an amendment to the Bill on Committee Stage in the other House to provide a legal basis for my Department to enter into contracts and joint ventures with various bodies for the provision of skills, including technical skills, and services overseas. This new provision is contained in section 33 of the Bill as amended by the Select Committee on Social Affairs.
The various skills which have been developed within my Department have resulted in numerous approaches from public and private organisations overseas seeking support on a consultancy basis. Over the past number of years, many groups from all over the world have visited Ireland to study how my Department operates. In the past month alone delegations from Poland, Russia and Slovakia have been here and a group from the Republic of Albania is scheduled to visit within the next few weeks.
In what I hope will set a new trend for Government Departments, my Department is to use our social welfare business expertise on a commercial basis. This is a new and exciting venture in public administration. With the opening up of eastern European countries many opportunities are presenting themselves. My Department is well positioned to maximise these opportunities in the development of new markets, which is an essential component of the Programme for Competitiveness and Work. This new role reflects the Government's determination to develop joint ventures between public and private sectors and to create commercial units within Departments which will develop and market the considerable expertise within the Civil Service, thereby bringing returns to the taxpayer in terms of business opportunities and jobs for young people.
For example, my Department is currently working with the Digital Equipment Corporation, our main computer supplier, to identify opportunities for marketing specialist products and services from Ireland to social welfare authorities in other countries. A number of approaches have been made from interested parties and these are being pursued. In addition, my Department is in discussion with European Union officials with a view to providing social welfare expertise for the emerging states.
It is widely recognised within the EU and the developing states that we have a considerable expertise in the social security area. The challenge is to translate that high level of expertise into the creation of skilled jobs for Irish people while at the same time assisting these developing countries to make the successful transition to a modern European state.
I now outline the main provisions of the Bill. Sections 3 and 4 provide for increases in the weekly rates of social insurance and social assistance payments with effect form July 1994. Those increases will more than maintain the real value of social welfare payments given the anticipated rate of inflation over the next year. The increases will give an extra 10 per cent for 112,000 people getting disability benefit or unemployment benefit, an extra 6 per cent for 185,000 people on the lowest payments such as unemployment assistance and supplementary welfare allowance which will bring those rates up to the priority rates recommended by the Commission on Social Welfare and an extra 3 per cent for over 822,000 people and their 627,000 dependants, including pensioners, widows and lone parents.
Section 3 also provides for an extra increase for some 1,100 invalidity pensioners who have attained 66 years of age. From July 1994, they will have their weekly pension boosted by an extra £10.20 a week for a single person, bringing to £71 the new weekly payment. A married couple currently getting £100.90 will receive £112.30, an increase of £11.40 a week. This is a significant improvement for those who are among the most vulnerable in our society and is in line with the recommendation of the National Pensions Board. This is an extra measure, introduced since the budget and it will be especially welcomed by invalidity pensioners who have passed the age of 66 years.
Section 5 gives an increase in child benefit for 270,000 children. It provides for an increase from £20 to £25 in the monthly rate for the third child and from £23 to £25 for subsequent children. These new rates will come into payment from the first Tuesday in September 1994.
Section 6 provides for further improvements in the rates of family income supplement. This supplement, more than ever, is giving much needed support to workers trying to bring up families on low pay. Take-up under the scheme has shown a dramatic increase of almost 25 per cent on this time last year. There are now 9,600 families getting family income supplement and over 30,000 children benefiting from this payment. It is clear that the substantial improvements brought into effect last year are now having an impact on take-up under the scheme. We made a special effort last year to improve the situation and this has been reflected in the increased take-up.
The weekly income thresholds below which families can qualify for family income supplement are being increased by £10 at each threshold point. The effect of this is to give family income supplement recipients an additional £6 per week in their weekly payment from July 1994 as will as bringing extra families into eligibility for the payment.
As a special contribution towards job maintenance and the creation of extra employment, we are introducing a package of measures to support jobs in hard pressed labour intensive sectors, such as clothing manufacturing and footwear and services, and to help those at work on low pay. These measures include PRSI reliefs for employers and levy exemptions which will amount to a cash injection of some £89 million in support for jobs in labour intensive sectors.
Sections 7 to 10 provide for a number of important PRSI restructuring measures which will being about significant changes in PRSI contributions and income levies directed at supporting jobs in labour intensive industries and those at work on low pay.
The main elements of the PRSI package are, first, a reduced rate of employer's PRSI contribution of 9 per cent, down from 12.2 per cent, which will apply across all sectors of employment where the employee earns £173 or less a week — the cost of this concession is about £31 million this year. In order to offset some of this cost, the contribution ceiling on the employer's contribution has been raised to £25,800 instead of £22,200. This will contribute an estimated £3 million this year bringing the net cost of these PRSI changes to £28 million in 1994. The full year investment in this concession is £46 million.
The introduction of a new employer's PRSI exemption scheme will operate on a similar basis to the successful 1993-94 scheme which generated some 3,770 jobs over the past two years. Under the new scheme, employers who take on additional employees from the live register between 6 April 1994 and 5 April 1995 will not have to pay the employer's share of PRSI contributions in respect of those employees during the two year period 6 April 1994 to 5 April 1996, provided the employees concerned represent a net increase in the number of employees in their employment over that applying on 21 February 1994. The value of this concession to an employer is considerable; it can be worth £1,268 a year in respect of a new employee with earnings of £200 per week.
The health contribution and the employment and training levy for low paid workers will be waived. Up to now they have been responsible for paying these levies on behalf of employees who are medical card holders. These levies amount to 2.25 per cent resulting in an employer's PRSI contribution of 14.45 per cent in some cases. It is estimated that 100,000 workers have medical cards so the measure will represent a significant benefit — up to £200 per employee — for their employers. This move will not only reduce PRSI costs but will also simplify administration of the system for all 125,000 employers. This measure is in line with the advice of the expert working group on the integration of the tax and social welfare systems in its interim report delivered before Christmas 1993. The waiving of these levies, provided for in sections 34 and 35 of the Bill, is not confined to people with medical cards, but it will also provide a boost to the take home pay of all lower paid employees and self-employed people who do not have medical cards. From 6 April 1994, employees who earn £173 or less per week and self-employed people whose annual income is £9,000 or less will no longer be liable to pay the 2.25 per cent levies.
I will keep the possibility of further concessions on PRSI under review. The current sound financial state of the social insurance fund is one of the factors which has allowed me to make the present concession. This is in part due to the continued success of our efforts to reduce black economy working. The value of these activities is clear in that they improve receipts to the fund and they allow rates for the legitimate economy to be set at the lowest possible level. Having regard to the primary objective of the Social Insurance Fund, which is to provide pensions and benefits for workers, I hope to continue down the road of shaping the PRSI system so as to encourage employment.
The legislative basis for the introduction of the new survivors pension scheme is contained in sections 11 and 14 of the Bill. For the first time in the history of the State we are introducing a contributory pension for widowers which will put widows and widowers on equal terms in relation to survivor's pension provision. This new pension is a huge breakthrough in the development of our social insurance system and it puts Ireland foremost among our European Union counterparts in providing equal treatment for men and women who become widowed.
Over 9,000 widowed men and their families will benefit for the first time under the new arrangements which will come into effect from next October. Under those arrangements, men and women who are widowed will be able to qualify for a contributory pension on the same basis on their own behalf or their late spouse's PRSI record and subject to the same contribution conditions. The cost of the new survivor's pension is about £6 million this year and up to £27 million in a full year.
There are currently over 85,500 widows receiving a contributory pension at an annual cost of £2 million. I want to make it clear that their situation will not be changed in any way by the introduction of this new "equal treatment" measure. This progressive move is a practical recognition of our changing family structure. Given our young population increasingly both spouses are participating in the workforce. In these circumstances, a surviving spouse — whether a woman or a man — with the responsibility of a young family is clearly in need of income support.
Sections 15, 16, 18 and 30 provide for improvements to the means tests for social assistance schemes. Section 15 deals with improvements in the lone parent's allowance in the case of lone parents with income from employment or self-employment. The current earning disregard of £6 for each child is being replaced by a flat rate disregard which will be prescribed in regulations. The new disregard will be set at £30 a week, inclusive of the initial means disregard of £6. In addition, where earnings exceed the new disregards, the amount of lone parent's allowance payable will be reduced by £1 for each £2 earned, instead of the current £1 for £1 arrangement. These improvements in the means test will mean that a lone parent with one child earning £80 per week will be better off in their lone parent's allowance to the extent of £18.90 a week. The changes will come into effect from 21 July 1994. This is an important development. Senators will note that a lone parent will be able to earn £2 and be reduced by only £1 or £30 and be reduced by only £15. This is a major change in the system and, in conjunction with the new £30 per week disregard, it will encourage lone parents to join the workforce. This provision will be welcomed by them.
Section 16 improves the existing provisions for the assessment of means for carer's allowance in the case of a carer where the spouse is in employment or self-employment. For the first time, a prescribed amount of earnings will be disregarded in the assessment of means. The earnings disregard will be set at £100 a week. This section also increases the initial means disregard from £2 to £6. These improvements will come into effect from 28 July 1994 and will ensure that an additional 500 carers will get the allowance for the first time and a further 350 existing carers will get increases in their weekly payments. For example, a full-time carer with a spouse earning £160 a week, who would not previously have been entitled to any payment, will now receive a weekly carer's allowane of £34.
Section 18 introduces a number of improvements to the current arrangements for the assessments of means for the purpose of various social assistance schemes. These include disregarding of the maintenance element of higher education grants for the purpose of the third level allowance scheme; disregarding mobility allowances or rehabilitation training allowances for all social assistance payments; exempting child benefit payments received from another EU member state; extending the exemption of home help income so as to include employment by an agency approved by a health board; and taking regulatory powers to exempt income derived from prescribed activities. What I have in mind here is exempting certain traditional activities such as seaweed collection along the western seaboard. This is important because a major factory is located in that area and there is a possibility of building a second one. The income from the collection of seaweed is taken into consideration. This gives me the regulatory power to exempt income from certain prescribed activities.
Section 30 brings the provisions for the rounding of means in the case of the supplementary welfare allowance scheme into line with those applying to unemployment assistance.
Section 17 provides for changes in the maternity benefit scheme arising from recent developments here and abroad. Maternity benefit will now be payable in the case of a still-birth after 24 weeks of the pregnancy; the current duration is 28 weeks. In addition, this section provides that the rate of maternity benefit payable may not be less than the rate of disability benefit which the claimant would have received if entitled to it. This brings Ireland into line with EC Directive 92/85 on the protection of pregnant workers.
Section 19 will exempt people engaged in casual employment from the condition of having to have sustained a substantial loss of employment before qualifying for unemployment benefit. The precise definition of casual employment for the purposes of the exemption will be set out in regulations which I propose to make as soon as the Bill is enacted. This section also provides for improved arrangements governing the linking of claims for unemployment benefit. Senators will be aware of my commitment to review this matter as one of the issues remaining from the measures introduced in 1992.
Section 21 provides for the discontinuance of pay-related benefit payable with unemployment benefit in the case of any new claim made after 20 July 1994 and also increases the weekly earnings disregarded in calculating the weekly rate of pay-related benefit from £80 to £97.50.
The personal rates of disability benefit and unemployment benefit have been singled out this year for an overall increase of 10 per cent, or £5.40 a week, which puts them on a par with the new long term rate of unemployment assistance, which is £61.00 a week. This special additional increase in the basic personal rates arises from the decision of the Government to discontinue pay-related benefit payable with unemployment benefit in the case of new claims with effect from next April. The savings from that measure are being devoted in full towards this special increase which will also apply to disability benefit from which pay-related benefit was discontinued in 1992. I should mention that, in addition to utilising the available savings, this special additional increase will cost £2.7 million this year.