I am very pleased to introduce this, the first of two Bills intended to implement the largest social welfare package in the history of the State of €1.41 billion announced in last week's budget. This substantial investment brings total expenditure on social welfare in 2007 to €15.3 billion, or €1 for every €3 of Government day-to-day spending. Some 1.5 million people will benefit from the significant increases and improvements in the budget that will protect and improve the living standards of social welfare recipients.
The budget is about delivering on the commitments to bring the non-contributory State pension to €200 per week and realising the 2007 target for the lowest social welfare rates. With increases in the qualified adult allowances, a pensioner on contributory State pension will be better off by almost €40 per week. In addition, the lowest rate of social welfare payments has increased by 12.1%, far in excess of the expected increase of 4.5% in private sector earnings and almost three times the forecast rate of inflation for 2007.
As well as substantial income support improvements of more than €970 million, another €430 million, nearly one third of the total package, is being directed to support a range of significant reform measures including confronting and tackling remaining child poverty; increasing income supports for all pensioners; recognising and supporting carers and those with disabilities; and increasing the status and incomes of women. These are major structural reforms which, when taken with a number of other reforms and changes that are being implemented or progressed, particularly in the areas of lone parents and occupational pensions, will contribute greatly to the overall policy reform agenda that I have been pursuing for the past two years. These reforms are about more than just increasing incomes. They are important and necessary structural reforms that create change, open up fresh opportunities and deliver enlightened social policies.
On many occasions in this House and elsewhere I have described child poverty as totally unacceptable in the prosperous and progressive Ireland of the 21st century. Childhood deprivation can leave lasting marks on children by impeding their development and curbing their life chances. It is a complex area that requires an integrated, joined-up Government response, such as the programme of priority measures envisaged in Towards 2016. However, in the meantime, I am determined that further progress must be made. That is why at the core of this welfare budget is the commitment to an even stronger and more focused campaign. We have already travelled some distance towards eliminating hardship and deprivation. In the past decade alone we have lifted more than 250,000 people, including 100,000 children, out of poverty. However, we still have a distance to travel.
I have long held the view that implementing a second tier of payment for children in low income and welfare families is the most effective method of significantly reducing remaining child poverty. Child benefit remains the main universal support for families with children. I now intend introducing in this Bill, a new single high-rate qualified child allowance — formerly child dependant allowance — targeted specifically at families on welfare where, naturally, children are most at risk of poverty. The current three qualified child allowance rates will be combined into a single rate of €22 per week to be paid for more than 340,000 children of welfare families. For those on the current lower rates of €16.80 and €19.30 per child per week, this represents a substantial improvement, particularly when child benefit and other increases are taken into account.
The allowance has remained unchanged since 1994 because it was viewed as a disincentive in moving people from welfare to work. However, Ireland's labour market has changed dramatically in the 12 years since then. Initiatives such as the introduction of the national minimum wage, the national employment action plan and the re-focussing of the family income supplement scheme have all served to reduce further the impact of the loss of qualified child allowance in the decision to take up full-time employment. I view this improved and targeted allowance as representing a substantial move in the direction of a second tier payment and that is why I have deliberately taken the decision to focus increased child supports in this area.
The budget included a number of other targeted measures. The back to school clothing and footwear allowance, a vital additional income support for poorer families at a particularly difficult time of the year, is being increased by €60 and €95, an increase of 50%. Over just two budgets this allowance has nearly doubled in value. The family income supplement, which provides cash support for employees with families on low earnings while at the same time maintaining incentives to employment, was refocused by me last year to concentrate on larger families, as all the evidence suggests that is where poverty is rooted.
These improvements, coupled with the response to the nationwide awareness campaign, has resulted in an increase of more than 20% and 21,400 families now receive the family income supplement. I am continuing this approach by re-focusing the family income supplement weekly earnings thresholds in favour of larger families. Consequently, average payments per child will increase to nearly €50 and changes in the thresholds will entitle approximately 5,600 additional families to the payment.
Everyone is entitled to a decent pension, and security and dignity in their later years. We have a responsibility to assist those who for reasons of age, health or other circumstances need the financial lifeline that is welfare support. At the core of the Government's commitment to delivering a number of specific and ambitious improvements in social welfare rates by 2007, was the pledge to bring the basic State pension to €200 per week. I am pleased to have been able to deliver on that promise by increasing the non-contributory State pension by €18 per week to €200 with effect from next January and the contributory State pension to more than €209 per week. The needs of older people have been, and will remain, a priority. For instance, since 1996 pensions have increased by almost 119%, approximately 57% in real terms, faster than both price and wage growth over the period.
All the more recent indicators, including the latest EU survey on income and living conditions for 2005, show the progress which is being made in significantly improving the well being of older people, with the consistent poverty rates for older people quite low at 3.7%, even before the many benefits flowing from the budget are taken into account. Last year's budget increased, for the first time in many years, the basic income disregard for the means test for non-contributory State pension to €20 per week. At the same time, I introduced incentives for pensioners on means-tested payments to earn up to €100 per week and retain their pension entitlements. In this year's budget, I am building on these improvements by increasing the disregard to €30 per week and doubling the allowed earnings to €200 per week. These measures will benefit approximately 26,000 pensioners who are now in receipt of a reduced rate of pension. They will also benefit from the general €18 per week increase in the personal rate of payment and, where relevant, the €11.90 increase in the qualified adult rate. In other words, many non-contributory pensioner couples will gain by more than €46 per week from these combined measures, with effect from next January.
Meeting household heating costs, particularly through the winter months, can be a cause of concern and anxiety for older people. Increases in energy and fuel prices only add to these anxieties, which is why we have taken actions to protect older people from the impact of price increases. Last year, I increased the fuel allowance to 274,000 recipients by €5 per week, to €14. This year, I am increasing it by a further €4 to €18 per week, a doubling of the allowance in just two years. To further address fuel poverty and to alleviate the worries of elderly people, the number of free units of electricity and gas paid under the household benefits scheme will increase significantly, from next January, by some 700 units a year to more than 2,500 units, at a cost of €50 million.
The budget includes several further improvements to the household benefits package. From next April, it will be possible for pensioners and others who qualify to have the free telephone allowance paid in respect of mobile telephones as well as fixed land lines. I am extending the automatic entitlement to a free travel companion pass to pensioners aged under 75 years who are medically unfit to travel unaccompanied. In addition, early 2007 will see the beginning of the introduction of an all-Ireland free travel scheme, which will apply to all pensioners, North and South.
Carers make a valued and valuable contribution to society by devoting their time and energy to improving the quality of life of others. I am determined that their dedication and sacrifice will be recognised and acknowledged through increased benefits and improved support measures. Since 1997, weekly payment rates to carers were greatly increased, qualifying conditions for the carer's allowance were significantly eased, coverage of the scheme was extended, and new schemes such as the respite care grant and carer's benefit were introduced and extended. As a result of these improvements, almost 28,500 carers are in receipt of either carer's allowance or carer's benefit.
We are committed to the development and publication, in 2007, of a national carer's strategy which will focus on supporting informal and family carers in the community. This is in addition to further agreed reforms, increases and improvements. As I have said on many occasions, the primary objective of the social welfare system is to provide income support. It is for this reason the rules specify that only one weekly welfare payment can be paid to any individual. I am aware this has been a cause of particular concern to people in receipt of a welfare payment when they become carers. I have taken into account the specific recommendations of the Oireachtas Joint Committee on Social and Family Affairs in this regard.
Accordingly, I am introducing fundamental structural reforms in this area. In future, people in receipt of certain social welfare payments, who are also providing full-time care, will be able to retain the main welfare payment and receive another payment, in the order of up to the half-rate carer's allowance. I expect some 18,000 carers will qualify for a half-rate carer's allowance of up to €109 per week under the new dual payment system. The details of the new arrangement are being examined by my Department and will be set out in the next social welfare Bill.
The abolition of the rule on two welfare payments means that for the first time, carers will have adequate recognition of their caring duties. It also signifies a change in our perception of the carer's allowance in that it will be seen less as a welfare income payment and more as a direct support for caring duties and responsibilities. This reform is an important step forward and I am determined to press ahead with other necessary reforms and improvements. Overall, the budget delivered an investment of more than €107 million in a comprehensive carers package.
This Bill achieves one of the principal commitments in my Department's disability sectoral plan. People in residential care prior to August 1999, or those who entered residential care after that date without an entitlement to disability allowance, are disqualified from receipt of the allowance solely because of their residency. This was partially addressed in budget 2005 when I introduced a new disability allowance personal expenses rate, currently payable at €35 per week to 2,700 people in residential care. I am now providing for eligibility to full disability allowance, as a matter of right, from next January for all persons resident in institutions.
In further advances in the area of disability, the Citizens Information Bill 2006, which is due to complete its progression through the Dáil later today and which will be before this House early next session, lays the statutory foundation for the provision of a personal advocacy service to people with disabilities. A further €1.9 million is allocated to continue the development of this and related services next year.
In delivering on the commitment to greater gender equality in the welfare system, and in making the welfare code fairer to women, the Bill includes important reforms that will lead to more enlightened social policies in the pensions area. Increasing the rate of qualified adult allowance for the spouses and partners of contributory pensioners by €23.70 per week will benefit some 35,500 couples. It will bring the rate of qualified adult allowance payments for those aged 66 years and over to 86.5% of the target rate as set out by the Government, which is to bring it up to the rate of the non-contributory State pension. There is a €60 million commitment to reaching that target in the coming three years, and €20 million of that will be utilised next year.
I also intend to introduce legislation, in the next social welfare Bill to be presented to this House in March next year, to provide for the qualified adult's entitlement to the qualified adult allowance for the duration of the entitlement of a State pensioner. As most qualified adults are women, this decision will be of enormous benefit to them as it will, in most cases, transform the payment into what is, in effect, a woman's pension in her own right. I also intend to provide for this payment to be made directly to the qualified adult.
I propose to reform significantly the manner in which spouses and partners are assessed as qualified adults across a range of social assistance schemes. The proposed reform involves assessing both members of a couple in a similar manner, with common disregards and assessments applying to both. In addition, I will remove the poverty traps that are present in the current method of assessment. Under these reforms, increases in labour market participation will instead be rewarded, and this will facilitate women in moving beyond the occupational cul-de-sac of indefinite part-time employment with earnings kept below €100 per week. These measures will significantly reduce the complexity in the present system, while recognising and rewarding increased labour market participation by all, and particularly by women.
The Bill introduces two beneficial measures that will assist widows and widowers at a particularly difficult time in their lives, in the immediate aftermath of the death of their spouse. To help in easing the financial strains at this sensitive time, the widowed parent grant will increase by €1,300 to €4,000, while the bereavement grant will rise by €215 to €850.
I will now outline the main provisions of the Bill. Sections 2 and 3, together with Schedules 1 and 2, provide for an increase of €16 in the contributory State pension and the contributory widow or widower’s pension. In addition, recipients of the deserted wife’s benefit who are aged 66 years and over will also receive an extra €16, as will those aged 65 years and over and in receipt of the transitional State pension or invalidity pensions. An increase of €18 per week is provided in the non-contributory State pension and the carer’s allowance. Recipients of invalidity pensions, non-contributory widow or widower’s pensions, deserted wife’s benefit and carer’s benefit will receive an increase of €20 per week. Payments including jobseeker’s benefit and allowance, illness benefit, one parent family payment, disability allowance, supplementary welfare allowance, carer’s allowance, farm assist and guardian’s payment are all increased by €20 per week.
Weekly increases in respect of qualified adults, ranging from €23.70 in the case of contributory and transitional State pensions where the qualified adult is over 66 years of age, to €10.70 if under 66 years, will ensure the existing proportional relationship between all personal rates of payment and that of their associated qualified adult allowances is either significantly increased to almost 83% in the former case or maintained at over 66% in the latter. These sections of the Bill also provide for increases in the qualified child allowance rates to bring the existing three rates up to a single standard rate of €22 per week. Where reduced rates of payment apply, proportionate increases will be implemented.
All personal, qualified adult and qualified child increases take effect from the first week in January 2007. Increases for recipients of jobseeker's benefit and allowance, illness and maternity benefit, one parent family payment, family income supplement, farm assist and supplementary welfare allowance will be made from the first payday in January 2007. Due to the lead-in times involved in the production of personal payable orders for certain long-term payments such as pensions, it will not be possible for budgetary increases to be paid immediately in such cases. Some 142,000 recipients, including those in receipt of widow or widower's, carer's and invalidity payments, for example, will receive their new order books in mid-February. These beneficiaries will receive six weeks arrears in the first order of the new book and the weekly increase will be incorporated in their normal weekly payment thereafter.
Certain other long-term recipients, such as State pensioners and those in receipt of disability allowance, will receive new pension order books at the end of March. This applies to some 276,000 customers. This group will receive a special once-off payment in mid-February representing 12 weeks of their budgetary increase. This will cover retrospection of the increase to January plus an advance payment of the increase to the end of March. From the book renewal date at end of March, the increase will be incorporated in the normal weekly payment.
Section 4 provides for increases in the weekly income thresholds applied in determining entitlement to family income supplement with effect from 4 January 2007. The new thresholds will range from €480 for a family with one child to €1,090 for a family of eight or more children. For example, a family with three children on €500, or about two thirds of gross average industrial weekly earnings, will receive €75 in 2007 compared to €39 currently, an increase of €36 per week.
Sections 5 and 6 provide for changes in PRSI. In budget 2006, the position was achieved whereby the threshold for liability to the employee element of PRSI was set at €300 per week, equivalent to the entry point to taxation. Section 7 provides for an increase of four weeks, from 22 weeks to 26 weeks, in the duration of maternity benefit. Section 8 provides for an increase of four weeks, from 20 weeks to 24 weeks, in the duration of adoptive benefit. These improvements take effect from 1 March 2007.
Section 9 and Schedule 1 provide for bereavement and death benefit grants. Section 10 provides for an increase of €10, from €20 to €30, in the weekly means disregard for non-contributory pension means-testing purposes from January 5, the same day the budget increase of €18 per week will come into effect.
Section 11 makes provision for the payment of full-rate disability allowance to those resident in institutions prior to 1 August 1999. A partial rate of €35 has been payable to some 2,700 such persons since 1 June 2005. Entitlement to the full-rate allowance will commence in January.
Legislation in 1988 provided for the introduction of self-employed, or class S contributions, but excluded from liability self-employed workers whose total income was below a threshold of £2,500, equivalent to €3,174 per annum. At the time, those who engaged in self-employment but were entitled to unemployment assistance were excluded from liability for PRSI in view of their low income levels. Over the years, the threshold for class S liability has remained unchanged while there has been significant improvements in disregards for means-tested schemes, notably with farm assist. There is also no provision for the award of credited contributions to self-employed workers. Therefore, a self-employed worker who is in receipt of farm assist or jobseeker's allowance may only maintain his or her contribution record through opting into the voluntary contribution scheme. In this context, it is desirable to improve access to social insurance coverage and enable continuing social insurance protection, specifically the accrual of contributions towards a contributory pension, by removing the exemption from PRSI liability for those in receipt of farm assist and jobseeker's allowance. This will be provided for in section 12.
To ensure the position of those on lower incomes is protected, the health contribution levy threshold is being increased by €40, from €440 per week to €480 per week, with the corresponding annual threshold being increased from €22,880 to €24,960. An additional 0.5% is being introduced in respect of income to the extent that it exceeds €100,100 per year or equivalent to €1,925 per week. This increase, which is expected to affect only the top 10% of earners, is effective from 1 January 2007.
The Social Welfare Bill 2006, the first of two instalments, builds further on the considerable progress made in recent years through a range of Government measures. It safeguards the living standards of those who rely on social welfare income and other supports and prioritises the allocation of resources at those most in need. The Bill is about solid and fundamental structural reforms of welfare policies in areas of child poverty, women's pensions and carers. These reforms will modernise and make the welfare system fairer to all, delivering more enlightened social policies.
I commend the Bill to the House and look forward to a constructive debate.