Select Committee on Social Affairs debate -
Tuesday, 28 Mar 1995

SECTION 5.

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

Proinsias De Rossa

This section provides for the improvements in child benefit. Subsection (1) provides for an increase of £7 in the monthly rate of child benefit. The new rates will be £27 for each of the first two children and £32 for each subsequent child.

Under existing provisions, child benefit is paid up to 18 years of age in the case of qualifying children who are in full-time education or who are physically or mentally disabled. Subsection (2) extends these provisions to 18-year olds who are in full time education or who are physically or mentally disabled.

Under existing provisions, child benefit can be paid outside of the State to a parent who is resident abroad while serving as a member of the Defence Forces or the Civil Service. Subsection (3) enables child benefit to be paid to a person who is resident abroad with his or her spouse or partner, where the spouse or partner is serving abroad as a member of the Defence Forces or Civil Service. Subsection (4) provides for the increased rate of child benefit and the extension to 18-year olds to come into effect on 1 September 1995.

The £7 increase will cost £90 million in a full year and the extension to 18-year olds in full-time education will cost an additional £12.8 million, a total of £103 million in a full year for the increase in child benefit. The increase from £20 to £27 will benefit in the region of 1,073,000 children and 490,000 families. The increase from £25 to £32 will benefit an additional 259,000 children and an additional 161,000 families.

The extension to 18-year olds in full-time education will benefit 20,800 children in second level education and 16,700 young people in third level education, a total of 37,500. Overall, a total of 1,369,500 children will benefit from these improvements. In addition to these improvements, payment of child benefit is being extended to 18-year olds on FÁS courses who are not receiving a weekly allowance; 1,900 young people will benefit from that measure.

This is an example of the targeted strategy that I referred to earlier, in response to criticisms of this social welfare budget from the Fianna Fáil representatives of this committee. It is an unprecedented increase in child benefit; never before has an increase of this size been granted. It is one of the best ways of targeting poverty in Ireland because those at most risk tend to be the families with most children. In the vast majority of cases, child benefit is paid to women. In many cases, it is a mother's only source of independent income. Studies have shown that women generally spend more of their income on their families than men, so directing payments to women is more likely to benefit children. We are mainly referring here to children who are in middle and low income households. Only 7 per cent of child benefit goes to people with incomes of over £25,000 per annum.

Since child benefit is a universal payment which is not taxed or withdrawn if parents take up employment, it does not act as a poverty or unemployment trap or a disincentive to work and this is a further reason for channelling as much income support for families as possible through this payment. It is one of the reasons why the Government intends to build further on this year's major increase and restructuring of the child income support system next year.

Women and children on low incomes are, of course, major beneficiaries generally of this social welfare budget and this appears to have gone largely unnoticed by the Fianna Fáil members of this committee. Of the extra £212 million which is now available to the Department of Social Welfare and which is being provided for in this Bill, £103 million is to be spent on improving child benefit, another £1.4 million on increasing the back-to-school clothing and footwear allowance under the SWA scheme and a further £4.2 million on carer's allowance, maternity benefit and pension arrangements for home makers, who are also mainly women.

Another £20 million has been earmarked for improvements in the deserted wives' and lone parents' allowances. The intention there is to bring in a separate Bill to cover these allowances. We would be introducing a uniform scheme for all parents who, for whatever reason, are rearing children on their own and need support. The scheme will be non-discriminatory, will cover both men and women and will be non-judgmental. Payment will depend not on the reasons for sole parenthood but simply on the number of children and the earnings of the parent concerned. No one will lose out as a result of the change.

The £127 million, or 60 per cent, of the increase in social welfare spending for the coming year is almost entirely going to women and children. We have also set aside a further £60 million to pay the equal treatment arrears. Indeed, I have negotiated a further £140 million since the announcement of the budget and this brings the total payments to married women who are entitled to equality arrears to £200 million this year.

This demonstrates that the criticisms of this budget are shortsighted and illfounded. The directing of substantial resources in a focused way to tackle the fundamental poverty in families is the best way to proceed. I acknowledge, as I have done on previous occasions in this debate and in earlier debates on the budget, that of course the basis rates should, and will be, increased. However, it is necessary to allocate resources, as they become available, in a way which tackles poverty in a real and not a superficial way. Any objective and fairminded assessment of this Bill would conclude that the fairly massive resources we are allocating to child benefit under section 5 of this Bill is the way to go.

Mr. J. Walsh

First, I welcome the substantial increases in child benefit this year. I acknowledge the fact that this was initially brought about by the Minister's predecessor, Deputy Woods, who established the Child Benefit Review Committee which recommended substantial increases in child benefit. I am glad the new Minister took that on board and made these increases.

While the child benefit allocation is substantial, to suggest that it addresses poverty is losing sight of the fact that several tens of thousands of people are on extremely low rates of main benefit and assistance and they do not qualify to any great extent under the child benefit scheme. For example, out of about 180,000 people holding old age contributory and non-contributory pensions, only about 2,000 have qualifying child dependants. Additionally, of around 62,900 people on unemployment benefit, only 26,000 qualify for child benefit and of 196,000 people qualifying for unemployment assistance, 62,841 have child dependants who qualify. There is still a major problem there, although the Minister does acknowledge that more should be done for those people. That is an improvement from last Friday, when the Minister said that he had no intention of doing anything further for them although I would have thought that something additional might be done for them later in the year. I ask the Minister does he still think as he did when Committee Stage of last year's Social Welfare Bill was debated, when he argued that these benefits should be taxed and "an enhanced child benefit will be paid universally and those in the tax net with substantial incomes will repay some of it through the tax system. The payment will be accountable for tax purposes." Does the Minister still hold that view and will there be a clawback in tax on these benefits?

I also would like to know if the Minister has any information on the percentage of people on various levels of earnings, particularly those earning over the average industrial wage — this is probably around £15,000 per annum — who will most benefit from this scheme?

Miss Flaherty

I welcome this section. It is a substantial jump in support for families with children in all sectors, from the poorest to the most comfortable. It does raise a lot of issues. As the Minister indicated when introducing this measure, this is only the first instalment of what we hope will be a major reform of the way in which we support families with children. It is moving from a system which skewed our support in favour of those out of work as against those who may be employed. In attempting to assist families, it became more a means of trapping them in unemployment. It is a problem which has been identified for many years by spokespersons in my own party. Deputy Jim Mitchell was to the fore in identifying the poverty trap and sometimes it raised hackles, in that people may have read into it the suggestion that those on social welfare were extremely well off. This was not what anybody ever said or could say, but, relative to low paid employment, there was little or negative benefit to people with families returning to work.

This has long been identified as a problem and this is the first attempt not only to finding a solution, but to implementing it. In discussing the last two sections, the Committee considered the fact that the child dependant allowances were remaining static. This relates to an overall approach which suggests that for the future the child benefit will be the main means of supporting children.

A number of other issues are raised by this. The first is that it will mean a substantial improvement for mothers and their children, which is to be welcomed. However, it is not much to crow about, because we in Ireland are among the lowest in the European league in support for our families with children. In addition, because of the low birth rates in other countries, the issue is one of not only assisting those on the lowest income, but ensuring that child rearing is not economically so penal for people that they stop choosing it, as has been happening frequently in Europe. For example, approximately 33 per cent of all marriages in Germany are childless and economic factors are considered to be the major contributor to this.

These economies have therefore had to face up to the fact that support should be provided for children in the most disadvantaged areas and that attempts must be made to create a society where people at certain levels of income with children are not much worse off than their cohorts without children. Such countries have had to frame child support mechanisms which are adequate, generous and substantial, and which encourage women especially, and, increasingly in certain countries, fathers to make the sacrifice with regard to career, time and economic consequences involved in having children.

This is a fundamental issue and one which the Committee will be attempting to consider from different perspectives. In this country the birth is still high and children provide multitudinous blessings, but they are also very costly. This reform will therefore be welcome to every family in whatever cohort.

Deputy J. Walsh asked how many families above the average household income will be in receipt of substantial benefits from this measure. There will be many families in this cohort and the Minister, in his previous incarnation as Opposition spokesperson, would have argued the case for some element of taxation in this regard. It is an issue which must stay on the table, expecially if we get child benefit up to a very high level. This was the approach recommended by the ESRI.

Returning to wealthy families, there are many women in families with a very high income who have little access to anything but a minimal part of that income and the child benefit for them is an important direct source of income. Will the Minister indicate in more detail his proposals for developing the next phase of this support for families in the form of supplementary child benefit and will he also indicate how he sees this building on the provisions in this legislation?

Proinsias De Rossa

It is nice to hear a word of welcome at last from the Fianna Fáil spokesperson on Social Welfare, although it sounded very begrudging. I have acknowledged, both publicly and otherwise, that when he was Minister for Social Welfare, Deputy Woods initiated the Child Benefit Review Committee and the report of that committee played a significant part in my thinking as to what should be done in the budget. To some extent at least, therefore, the former Minister, Deputy Woods, should take some credit for the skewing of resources towards child benefit in the budget and the fact that the resources thereby available for general increases were limited as a result.

Some play has been made of the fact that single people on unemployment assistance without children, or couples on pensions without children and so on may be at greater risk of poverty than anybody else. However, page 20 of the report submitted by the Child Benefit Review Committee illustrates Table 4 from the survey by the ESRI of poverty, income and welfare in Ireland (1987), and states:

... larger families face greater risk of poverty than small families. Older children were not found to face a higher risk of poverty than younger children. So, CB serves a valuable purpose in providing more help to low income families with the existing rate structure.

The table itself outlines in graphic form the risk of poverty by age and family size. Bearing in mind that it refers to 1987, it shows that 12.3 per cent of families with children in what it calls the bottom decile, or the lowest income level, are at risk of poverty. The table shows at the top of the decile that 6.7 per cent of the children of such families, even those on relatively high incomes, are still at risk from poverty. This highlights the fact that even though there may be a significant income to a household, or at least being earned by what would be referred to as the head of the household, there is no guarantee that this income is used to the benefit of the family, and the statistics illustrate that approximately 6.7 per cent of children are at risk of poverty even though they are in families with, in theory at least, a relatively high income coming to that household.

The evidence suggests that if resources are directed to the person who is caring for the children — and this is primarily the mother — the money is spent by her, to a far greater extent, in caring for those children and on general family costs. There is, therefore, a strong case for directing these resources to child benefit for the reasons I have outlined — the fact that they are not taxed and taken from people if they are unemployed and get a job, or if they are employed and they get a rise, thereby not creating a poverty trap or an unemployment trap.

This is one of the reasons why I deliberately did not increase child dependant allowances as I considered that it would be more beneficial to families that any increase with regard to children should be in child benefit. If people get an increase in child dependant allowances and they subsequently get a job they lose the child dependant allowances and, therefore, lose the support for the children, whereas if that increase is directed to child benefit they do not lose it as a result of getting work.

There is an extremely strong case, backed up by acres of reports, as to the way in which we should tackle poverty in families. Given our child centred society it should be welcomed that the Department of Social Welfare directs resources towards dealing effectively with poverty rather than opting for a sticking plaster solution by using all available resources to apply a thin layer of increase across the board. That does nothing for the real poverty that exists. On this occasion I have directed the support towards children.

Deputy Walsh continues to misinterpret what I said last week about my intentions regarding this Bill. I pointed out last week that I had no intention of changing the direction of this Bill. I did not say that I had no intention of doing anything further, which the Deputy implied. Of course, I intend to go further. I intend to be Minister for Social Welfare for at least another two budgets — perhaps more — and I intend to ensure that the start I have made in tackling poverty at its roots will be continued. That will include moving towards the rates recommended by the Commission on Social Welfare. However, those rates were established in 1985 and are long overdue for review. There is a specific commitment in the Programme for Government to undertake a review of those rates at an early date. Arrangements are in train to have that work done. It is not a question of being obliged to tie oneself to rates that were considered appropriate more than 10 years ago; we must update those rates and take into account other measures that have evolved and developed since they were established.

Deputy Walsh also quoted out of context a remark I made about tax on child benefit. I believe as a matter of principle that all income should be taxable.

Mr. J. Walsh

I quoted the Minister directly from the Official Report.

Proinsias De Rossa

I am confirming my point that, as a matter of principle, all income regardless of its source should be liable to tax. That would apply in an ideal world. However, we do not live in an ideal world. We do not have an ideal tax system or an ideal social welfare system.

As I pointed out in the debate on taxation of unemployment and disability benefit from which the Deputy is quoting, the unfair nature of our tax system and the fact that our social welfare payments generally are still inadequate means that inevitably there would be injustice in taxing social welfare payments. I have argued against taxing unemployment and disability benefits on that basis. I argue against taxing child benefit for the same reason. It would introduce further unfairness into a system where unfairness already exists. When we finally, if ever, establish an equitable tax system in which all sections of society pay their fair share, in which the self-employed and farmers fully comply with the tax system, in which all evasion and avoidance devices are eliminated and in which social welfare provisions are more than adequate to ensure that people are not living in poverty, then by all means let us tax social welfare payments. I will not support, therefore, any proposal to tax child benefit.

Members have asked who will benefit most while Deputy Walsh asked for the number of those on the average industrial wage who might benefit. I do not have that information. However, I have information to the effect that less than 7 per cent of child benefit goes to families or people on incomes of more than £25,000 per year. There is a simple reason for that. People tend to enter higher income brackets when they are older. They move up the incremental scale in their work whether they are civil servants or in private industry. The older one is, the higher one's income tends to be, particularly if one is in secure, pensionable employment. By then children have become adults and are no longer entitled to child benefit. A small proportion of child benefit goes to people on higher incomes.

Introducing tax on the payment would militate against its universal nature. It would create all sorts of anomalies. It would undermine the fact that it goes to women who work in the home to a significant extent. It would result in friction between spouses or partners. One partner might be out working and paying tax while the other partner working at home would not be paying tax. If child benefit is taxed one inevitably must tax the income of the spouse who is working. We have seen — and I am sure all Members have encountered this problem at their advice centres — the friction that occurs between spouses at present where tax on unemployment benefit or disability benefits results in the take-home pay of the partner at work being reduced. The tax due on unemployment benefit or disability benefit is taken from the spouse who is working and not from the person who is not working. There are many reasons for not taxing child benefit.

With regard to the next phase — and as Deputy Flaherty says I have referred to this a number of times — there is a commitment in the Programme for Government to introduce a child benefit supplement. It is proposed that the child dependant allowances, which are payable for child support to people on social welfare, and the child support element of the family income supplement would be amalgamated and used as a child benefit supplement. It sounds simple but it is quite complex. We have asked the working group on the integration of tax and social welfare to address this question and to bring forward proposals at an early stage so that we can begin to put it in place starting with next year's budget. The significant point is that the supplement would not be paid to every recipient of child benefit. It would be paid only to those on social welfare and those on low incomes.

Again, it would be focused on those families most likely to be in the poverty trap. I cannot add anything further on that issue, except that work is being done on it. It is an innovative, even revolutionary approach to support for children and like child benefit it prevents an unemployed person who takes a job from losing child support payments.

It has been said the basis of the increase in child benefit in this budget arose directly from the Child Benefit Review Committee. While I fully acknowledge the committee played a significant role, the executive summary of its report recommended a £5 increase per child per month, whereas the increase given was £7 per month per child. It made that recommendation while pointing out it had no reason for choosing £5 as opposed to £1 or £3 or £10; the commitee felt this was possibly the limit of what was achievable in current financial circumstances. A number of members of this committee told me they were astonished I was able to get a £7 increase.

Dr. Woods

In relation to Deputy Walsh's point about taxation, it is clear the Minister has changed his view over the course of the year. The Official Report of the meeting of the Select Committee on Social Affairs on Wednesday, 9 March 1994 has the current Minister speaking on Committee Stage of the Social Welfare Bill, 1994, at Volume S2, column 64, as follows:

An enhanced child benefit would be paid universally and those in the tax net and those with substantial incomes would repay some of it through the tax system. The payment would be accountable for tax purposes and that is why I [the current Minister, then Deputy De Rossa] suggest that integrating the tax and social welfare codes is important in terms of what I am arguing for here.

There is no doubt the Minister has changed his view since that time, as Deputy Walsh said. To return to the general position, this section——

Proinsias De Rossa

The Deputy is quoting selectively.

Dr. Woods

I read it exactly as it is in the Official Report.

Proinsias De Rossa

One has to read the whole speech.

Mr. Flood

That would take too long.

Dr. Woods

It is a bit long-winded. This section deals with the increase in child benefit and undoubtedly both the previous and the current Governments were committed to such increases. I am glad that has now been recognised as an important vehicle for transfer of moneys to families with children. While a substantial increase has been given and is welcome, the difficulty is that the Minister has taken money from old age pensioners and people on lowest payments, who should have received a minimum increase of 3 per cent and a further improvement in the Commission on Social Welfare rates.

Miss Flaherty

Fianna Fáil would take it back from mothers and children.

Dr. Woods

Fianna Fáil are not opposed to improvements in child benefit; the report, as the Minister has admitted, set the framework for these improvements specifically for this budget and this Bill.

Proinsias De Rossa

I did not admit it. I acknowledged it.

Dr. Woods

Perhaps the Minister is acknowledging rather than admitting that — we will accept his semantics. Our difficulty is that while it is important to do this, it should not be at the expense of old age pensioners and the unemployed who do not have children.

Approximately 196,000 people receive unemployment assistance but only 62,000 of them have children, so less than one-third can benefit from these improvements. That is the basic problem; while those improvements are good, those on the lowest level should still have received an increase and should not have remained at the same level, receiving a mere 2.5 per cent increase.

In the figures supplied by the Department, we see there are 180,000 old age pensioners who are restricted to a 2.5 per cent increase — which will probably be exceeded by inflation. Only 2,000 of them have children, so only that number can possibly gain from what the Minister is doing under this section. That is the imbalance.

Every Member of the House welcomes the increase in child benefit.

Proinsias De Rossa

Does the Deputy welcome the £7 increase?

Dr. Woods

The levels are fine; the Minister would know that if he had checked the report. If one looks at the position in comparison to European countries——

Proinsias De Rossa

Does the Deputy welcome the increase?

Dr. Woods

Yes, I do.

Mr. Flood

It is a pity it was not a £9 increase.

Proinsias De Rossa

That is what I wanted to know. Does he want to take anything back?

Dr. Woods

If the Minister looks at the position in other EU countries on child benefit rates expressed as the average per capita rate as a percentage of GDP, the rates in 1993 were: Denmark, 138 per cent; Luxembourg, 136 per cent; Germany, 123 per cent; France, 115 per cent; Belgium, 109 per cent; the Netherlands, 107 per cent; Italy, 92 per cent; the UK, 86 per cent; and Ireland, 68 per cent. We all want that increased to benefit families and children. That was our objective previously and it is why the Child Benefit Review Committee was established. Its report was presented to the Minister in January 1995 and it states:

From the terms of reference, it is clear the committee was working within the the context of the Programme for a Partnership Government (1993). Shortly before we finalised our report, the new Government's programme, A Government of Renewal was published.

That document had similar commitments. The introduction of the report outlines the terms of reference of the report, which are said to be in light of "the commitments in the Programme for a Partnership Government, 1993 to 1997 [the Fianna Fáil/Labour Government] and in the Programme for Competitiveness and Work”. It was therefore not simply a matter of a commitment of the partnership Government. The latter was worked out between the partnership Government of Fianna Fáil and Labour and the social partners on a national basis. The terms of reference continue:

and having regard to the changing demographic situation, the changing needs of families and recent reports on child income support, to examine proposals for the further development of Child Benefit, [recognising of course that it was already being developed by the Fianna Fáil/Labour Government] and to make recommendations to the Minister for Social Welfare on appropriate changes, with particular reference to the costs that could be considered for the 1995 budget.

It was specifically within the terms of the partnership Government programme and the terms of the Programme for Competitiveness and Work.Whether Deputy De Rossa, I or somebody else was Minister, there was a general agreement under the Programme for Competitiveness and Work that this was the line we were taking.

The committee, under the chairmanship of Dr. Finola Kennedy, did an excellent job in a very short time. It would be better if all committees reported within a couple of months rather than coming back after six months to say they were still thinking and would return later. It certainly was an excellent committee. Its members were Deirdre Carroll, Assistant Secretary in the Department of Social Welfare, Brian Flynn, a principal officer in the Department of Social Welfare, Michael Guilfoyle, a principal officer in the Department of Finance, Catherine Hazlett, then partnership programme manager in the Department of Social Welfare, Dr. Gabriel Kiely of the family studies centre, UCD, Mr. Tom McSweeney from the Society of St. Vincent de Paul, Professor Brian Nolan of the ESRI and Ms Bridin Twist, the national president of the ICA. The secretary was Anne McManus from the Department of Social Welfare.

The committee deserves a great deal of credit because, in a very short time, they brought together the essential elements which needed to be considered in the budgetary context. They made a number of proposals, the first of which is given on page 28 of the report. They said that an immediate step should be taken to increase child benefit by £5 per month per child. They gave the cost of that in a full year and the cost in 1995. They stressed that, in many respects, when choosing the amount of the proposed increase in 1995, they were conscious that the figure would be an arbitrary one. They suggested that £5 would strike a balance between a reasonable increase and a realistic approach to funding. In the event that funding would be available for an increase of more than £5, they detailed the cost of other increases. They gave the increases for higher rates and for each £1 intermediate rate. However, they recommended that, at a minimum, it should be increased by £5, which was accepted.

The committee also mentioned previous increases. They pointed to the fact that an increase of £4.20 had been given in 1993 and said that they wanted to continue that approach. The Minister has been slow to recognise that this was a substantial increase in 1993 terms. It was not far off the equivalent of a £5 increase in current terms. In any event, it was a substantial increase. Further increases were given the next year and a major increase was planned for this year.

There is no difference between us on this section. Thankfully, we all agree on it at this stage because it took much argument. Many spurious arguments were made over the years which I now hear the Minister counteracting by talking about the advantage of child benefit to larger families. He stressed that child benefit was a special benefit and a help to larger families. However, while that is very welcome, this Bill, and the budget as a whole, was, in our view, mistaken in holding back the main rates for the personal and adult dependant rates.

We recognise what the Minister has done in relation to child dependant allowances. He says that his child benefit is to make up for the non-increase in child dependant allowances. The Minister said that today and last Friday. However, he is also saying that two-thirds of those on unemployment assistance, nearly half of those on supplementary welfare allowance and old age pensioners, where only 2,000 out of 180,000 have children, can wait for another year. What is another year? They might get something another year. He is suggesting in effect that there will be something for them at the end of the rainbow. That is not good enough because rainbows can fade. They want improvements and increases this year and that is where the Bill, as a whole, is out of balance.

We welcome the section which will be particularly valuable for families. Looking at our percentage in Europe, it is the direction in which we have to go. I believe it is right to give substantial improvements here and in that sense we welcome it. Our difficulty is with the 2.5 per cent elsewhere and the lack of progress in relation to the Commission on Social Welfare rates.

Miss Flaherty

I am somewhat overwhelmed by the amount of report which has been read to me and which distracted me slightly. The Minister has indicated that the next incremental reform will be the new child supplementary benefit. The alternative approach was that recommended by Professor Nolan who was a member of the committee and had done much work in this area with Tim Callan from the ESRI. They recommended the full integration of child benefit and child dependant allowance with a substantial increase in the gross level and it being taxable as a means of funding it. Is that option still there for the future or do the economics of it rule it out completely? Has the Minister any comment to make on that approach?

Mr. Flood

The Minister has challenged this side of the House on a number of occasions during the contributions by Deputies Woods and Walsh as to whether we welcome the £7 increase in child benefit. We would probably be even happier if it was more but we do welcome the £7 increase and know it will be of benefit to many families. As Deputy Woods pointed out, many people will miss out on the benefits. I appreciate that we continue to repeat this point but two-thirds will not benefit from this increase. That is obviously a disappointment for them as they are going back to the 2.5 per cent increase. Some increases amount to about 90p a week for an adult dependant. Where would one go with 90p? It is not even a pound note in old terms. This is the point at which we return time and again to the 2.5 per cent increase because 90p a week will not get one very far.

If I understand it correctly, the child benefit increase comes into effect in September. Much play has been made of the fact that the other increases have been brought forward by six weeks. We welcome this, but why could the increase in child benefit not also have been brought forward by six weeks? Perhaps there are financial or administrative reasons, but the fact is that the other larger increases have been brought forward. This is a pity, particularly for the recipients, even though they will no doubt welcome them.

I am amazed at the 2.5 per cent increase. When we were on the other side of the House, we listened time and again to Deputy De Rossa, now Minister De Rossa, and others say that increases of 3 per cent and 4 per cent were derisory, unacceptable and cruel. Within a matter of months, that type of statement changed very quickly to the type we are now receiving. Nobody will convince me or any of my constituents who will receive the 2.5 per cent increase that it is anything other than bad for them. I hope this level will not be the norm for future years, as it clearly runs below the rate of inflation. In many cases under this budget, social welfare recipients are going backwards.

In relation to family income supplement——

Chairman

I wish to remind the Deputy that he is rambling into a Second Stage speech. I ask him to confine his remarks to section 5, which deals with child benefit.

Mr. Flood

The Chairman used the word "rambling". Perhaps I am rambling, but there has been much rambling on different sides.

Chairman

Yes, but I am just giving a warning at this point that I must apply the rules rather strictly. I have, admittedly, allowed Deputies to ramble far wide of the section we are discussing, but we must make progress. We must stick to the rules and to the section or amendment under discussion. I appeal to all Members to confine their remarks to section 5, which deals with child benefit.

Mr. Flood

I take it the Chairman will be a little more severe from now on.

Chairman

I will be a little less unsevere.

Dr. Woods

On a point of order, I do not really know to what the Chairman is referring. All the references I heard this afternoon were either to the related report or to children under the different categories who will or will not benefit.

Chairman

On this section, there have been a number of references to previous sections and related increases.

Dr. Woods

Reference was made to the fact that only one-third of the unemployed, to whom we referred earlier, and only 2,000 of 180,000 old age pensioners have children so they cannot benefit from this increase. The references were relevant.

Chairman

We are dealing with Committee Stage of a Bill, which is a technical operation.

Dr. Woods

It is, yes.

Chairman

In order to complete Committee Stage, we must have certain rules, which confine our remarks to particular sections. Deputy Woods's references are in order on Second Stage because such points are the purpose of that stage. There was ample facility on Second Stage of this Bill to make those points and relate them to all the sections. However, we are now dealing in a rather technical way with the various sections and it is important that we confine ourselves to discussion of particular sections. There will be a further opportunity on Report Stage for a more general discussion of the Bill.

Dr. Woods

With respect, Chairman——

Chairman

Deputy Flood was in possession.

Dr. Woods

With respect, Chairman, this is a very serious issue. That is not my understanding of Committee Stage of a Bill. The purpose of questions is to elicit information and to point to differences in quantities and numbers. If we cannot do that on Committee Stage of a Bill, there is little point——

Chairman

I have allowed that and I am not arguing against it.

Dr. Woods

Once that is clear.

Chairman

There has been wide discussion of the Bill under this section. There have been what nearly amount to Second Stage speeches. At this stage and in the best interest of the Bill, I appeal to Members to deal with it section by section as we should do on Committee Stage. I call Deputy Flood on section 5.

Mr. Flood

I ask the Minister to confirm, in relation to the increase in child benefit, if it is a fact that 240 pensioners will not benefit from them. We should take into account that the opportunity existed to do much better. There was a current budget surplus in 1994 for the first time in 27 years, circumstances for which people hoped several years ago. Given that those circumstances existed, the Minister and Government blew it in relation to the vast majority of social welfare recipients. Is it a fact that 240 pensioners will not gain from child benefit increases?

Proinsias De Rossa

I find it extraordinary that the Fianna Fáil spokespersons seek to claim credit for the child benefit increases for their party, while attacking the Government on all the other increases because they regard them as inadequate. I asked Deputy Woods if he welcomed the full £7 increase for children in the Social Welfare Bill, He said he welcomed it, but the question then arises as to where he feels the additional resources, within the social welfare budget, should come from in order to provide the additional 30p per week for which he is arguing with regard to supplementary welfare allowance, unemployment allowance, pensioners, etc.

This is the first question I put to the Fianna Fáil spokespersons. No amendment has been been tabled to reduce child benefit payments and they appear quite happy to support the £7 a week increase. I welcome the fact that they will not oppose it, but they cannot argue the two ends against the middle. This year's social welfare increase is 35 per cent above that achieved last year by the former Minister, Deputy Woods. It cannot be argued that there is less money available this year for social welfare than there was last year.

They seem to argue against the targeting of child poverty, which I have done by increasing child benefit. They seem to say that I should not have given as much to child benefit, but instead given an extra 30p a week to the unemployed. I would prefer it if they had the courage to put an amendment down to that effect, rather than going through the hoops by pretending to support child benefit increases but then arguing that the money should have been used some other way. This is the net point of their argument so far on this issue.

The other aspect of this is that while on the one hand the Opposition is arguing for greater increases in social welfare spending, their spokespersons on other areas are arguing that public spending is too high. I have heard their spokesperson, Deputy McCreevy, say on radio numerous times that we are breaching public spending criteria. They are trying to argue that we are spending too much; they welcome the increase for child benefit yet at the same time they say that we have not given enough to the unemployed and to pensioners. It is not possible to have it every way. The Opposition has to make up its mind. Does the Opposition support child benefit or not? If it does, it must drop its spurious argument in relation to reallocating those resources to others in the social welfare net. If the Opposition is arguing that we are spending too much money, then Deputies should tell us where we should cut social welfare in order to come within the criteria with which they believe we should be complying.

This debate has highlighted the hypocrisy of Fianna Fáil on this issue. For instance, I draw attention to the fact that last year when Deputy Woods was Minister for Social Welfare, the child benefit increase for 1994 was £4.5 million and £13 million in a full year. If you compare that with this year, I am providing a £30 million increase, that is £90 million extra in a full year. There is no comparison there with what the Minister for Social Welfare did last year for child benefit. The argument is spurious and the Opposition is caught trying to argue the two ends against the middle. It does not wash; nobody outside this House accepts that they are serious about this. The fact that the Opposition spokesperson for Social Welfare has been virtually silent in this whole debate indicates far more to me about the true view of Fianna Fáil on this issue than the spurious argumentation we have heard here over the last two days.

Mr. Flood

Chairman, picking up where the Minister left off, I say his own party is particularly silent. They are not coming in here to defend him either. The Labour Party, in particular, as far as I can see, have been absent from this debate.

Proinsias De Rossa

They know I am well able for the Deputy.

Mr. Flood

I know the Minister cannot see what is behind him there but I can tell him that no members of the Labour Party have come rushing in here to defend him. To hear the Minister defending current Government public spending is an extraordinary turnaround from the past. The history books and the reports of these debates from previous years make extraordinary reading. I never thought I would see a situation where the leader of the Democratic Left Party would come in here as Minister and support what would be then current Government public spending. It is quite amazing to tell us that for 30p we would have to make cuts somewhere else. In previous years the present Minister has told the Government on this part of the social welfare debate where to find the money and where to spend it. That is what the record shows, but it has all changed dramatically now.

Mr. J. Walsh

Chairman, you had some comments to make about Second Stage speeches; we heard a fine Second Stage speech from the Minister. The fact of the matter is that in the budget debate, in the private members' debate and in the social welfare debate, I have highlighted the inadequacy of the performance of the Minister in relation to this Bill, his first Social Welfare Bill. He talks about hypocrisy under this section and while I have already acknowledged his expertise in this area, the fact of the matter is that I have highlighted his hypocritical stance in relation to the poor, in this year of plenty in particular.

I quoted from the contribution he made last year when he did not have the benefit of a State car or of the trappings of power. He has quickly forgotten about the people he purported to champion for so long. In case there was any misunderstanding I would like to read that particular section into the record again.

Chairman

Relate your words to section 5, Deputy.

Mr. J. Walsh

Yes, that is in relation to child benefit, the Minister in a different role as Deputy last year, on Wednesday, 9 March 1994 on the Social Welfare Bill, volume S2 No. 1, column 64, said:

... an enhanced child benefit would be paid universally and those in the tax net and with substantial incomes would repay some of it through the tax system. The payment would be accountable for tax purposes. That is why I suggest that integrating the tax and social welfare codes is important in terms of what I am arguing for here.

Arguing in one direction last year and performing in another this year gives us an indication of the hypocrisy to which we are treated here. It is quite evident that the concern shown out of office and the performance in office are two different matters as far as the Minister is concerned.

I did argue that it is mind boggling and hardly believable that the Minister would stand over concessions to the middle classes, in particular to the banking fraternity, for whom £40 million per annum was found. We are arguing here that to bring general benefits up to the levels recommended by the Commission on Social Welfare would cost only a fraction of that. Our amendments on this Bill are reasonable and our attitude to this section is that we welcome the increase of £7 and have no difficulty whatsoever with it. It is fair and proper that Opposition Members can put down amendments to those sections which they feel can be amended and agree with sections which they approve of. We actually agree with this section and we do not have an amendment down to it.

Dr. Woods

Chairman, in relation to the Minister's comments on this and the challenge he puts to the Opposition to decide where they would find the money, I have to remind the Minister that he is the one who is now responsible for finding and distributing the money. If he leaves certain groups particularly badly off, then it is the responsibility of the Opposition to point this out and to show that he is leaving, for instance, old age pensioners and many of the unemployed very badly off, because he is giving them only a 2.5 per cent increase. It is the lowest percentage increase in the last 30 years and that is all he is doing for them. That is where we believe his balancing is wrong.

The Government has money, the Minister has been able to find large sums of money through various means. We are talking about very small amounts of money here, for instance we pointed out that to improve the position of recipients of short term unemployment assistance and supplementary welfare allowance in line with the recommendations of the Commission on Social Welfare would only in this year have cost £3 million. In terms of the money the Minister is talking about now, finding money of this order could not be particularly difficult. When the Minister tells the Opposition on this occasion to say where the money would come from, I must point out to him that in fact the social insurance fund has a surplus of some £50 million and that amount was available to be used to improve benefits such as unemployment benefit, and bring it more in line with the Commission on Social Welfare's recommendations to close the remaining gap on the main rate which we discussed earlier. There was money in the social insurance fund to do that. Other means could have been found, as the Minister has found means of meeting his other requirements he had. There are various ways in which that could be approached.

Notwithstanding all of that the Minister would like to distract attention from the reality for many thousands that they will do badly from this Bill and the budget; that they will do worse from this budget than in any other year in recent times. For them this budget and this Bill which implements the social welfare elements, is bad news and will be bad in practice. As far as this section is concerned, we support it.

Mr. Flood

The Minister challenged us to say where the money would come from for any increases we might have preferred. There were some changes which promised that over a period of three years the bank levy would be phased out. That relieves the banks of a liability of £12 million taxation every year for three years. The reduction in corporation profits tax from 40 per cent to 38 per cent on £100 million profits to the banks reduces their liability by £2 million. The Minister could have looked there to get the extra resources he needed. Was it that there was a great groundswell of sympathy for the banking community to relieve them of this bank levy and assist them with the reduction in their corporation tax liability on the huge profits banks make?

Their profits have often been the subject of close scrutiny and debate by members of Democratic Left — rightly so. The rest of us have also been concerned at times about the level of profits and the charges made by banks.

That is an area in which the Minister might have got some of the money. To give old age pensioners a 3 per cent increase would have cost an additional £8 million. A sum of £8 million could have been taken from the £12 million of which the banks have been relieved to give the 3 per cent rather than the 2.5 per cent increase. The Minister might have got the money there. He might have had difficulty in persuading the Department of Finance to co-operate, but that is another matter.

Proinsias De Rossa

I want to spare Fianna Fáil the embarrassment of having to vote against this section. As the former Minister for Social Welfare, Deputy Woods, knows, the social insurance fund cannot be used for purposes other than social insurance payments.

Dr. Woods

Or increases.

Proinsias De Rossa

Indeed, or increases. Therefore, it could no be used to increased the supplementary welfare allowance.

Dr. Woods

I said that under the social insurance fund unemployment benefit could be increased.

Proinsias De Rossa

The Deputy spent most of his time this afternoon arguing that we should have found the resources to increase supplementary welfare allowance and short term unemployment assistance. He then jumped in and——

Dr. Woods

We discussed the others on Friday.

Proinsias De Rossa

——said there was a surplus of £50 million projected for the social insurance fund and we should have used that. He keeps shifting the goalposts. There are many arguments about maintaining the differential between SWA and short term unemployment assistance on the one hand, and long term assistance payments on the other. Those on long term payments fought a long hard battle to get an incremental differential between themselves and those on short term because those on short term are, by definition, more likely to be on the payments for a short period of time.

The Deputy also referred to here being the capacity to find large amounts of money for other purposes — I note he is reluctant to even mention the term "equality arrears".

Dr. Woods

That is in the next section. We are coming to that in a minute.

Proinsias De Rossa

He also knows that it is a once-off payment. What we are talking about here is payments which once they are given——

Dr. Woods

It will not be once-off.

Proinsias De Rossa

Once increases are given they are continuous; the money has to be found for them every year. The money I have found for the equality arrears is money which is required once-off and, therefore, it does not result in a charge on the Exchequer year after year.

The Fianna Fáil speakers have a short memory when it comes to the "dirty dozen cuts" in social welfare for which it was responsible in 1992. The bank levy is one of the distortions of the budget which Fianna Fáil spokespersons continually trot out. When Fianna Fáil was in Government with the Progressive Democrats they effectively abolished the bank levy by enabling the banks to set off proportions of their tax liability against what they would be likely to pay on the levy. That has been the practice since Fianna Fáil was in Government with the Progressive Democrats. The levy was effectively abolished by Fianna Fáil in Government with the Progressive Democrats.

What we have done is to tidy up the law in relation to it and there is no loss to the Exchequer as a result of that process. The banks will pay no less to the Exchequer as a result of the removal of the bank levy legislation in the Finance Bill because Fianna Fáil and the Progressive Democrats had effectively abolished the levy by allowing the banks to set their tax against the levy they would be liable for.

I would point out to Deputy Flood that there is no money available, in case he is genuinely misled.

Mr. Flood

What about the 2 per cent corporation tax? I suppose that has been set off also.

Proinsias De Rossa

I will deal with the corporation tax. In case the Deputy is genuinely misled about the bank levy, I would not like him to seem foolish if he were to go on "Questions and Answers" and trot out this misinformation. He would then have to come back and correct himself at a future date.

Mr. Flood

It is only members of the Labour Party who do that. The Minister's colleagues in Government make foolish mistakes on "Questions and Answers".

Proinsias De Rossa

With regard to the corporation profits tax I look forward to seeing the Fianna Fáil amendment to the Finance Bill which seeks to remove that concession. Since Fianna Fáil is such an enemy of the banks these days I look forward to the withdrawal of its opposition to the £25,000 charge which the Minister of State, Deputy Rabbitte, is introducing in the Consumer Credit Bill. That would be a useful approach by Fianna Fáil if it was serious——

Mr. Flood

We are dealing with the Minister's position.

Proinsias De Rossa

—if it was not just engaging in hypocritical grandstanding on the Social Welfare Bill and would put down an amendment to the Finance Bill seeking a reversal of the reduction in the corporation profits tax. By homing in on banks, it ignores the fact that the reduction in the corporation profits tax will assist thousands of small companies struggling to survive, which provide thousands of jobs. It is a spurious argument and it should be acknowledged that this is the biggest increase ever in child benefit.

Mr. Flood

The banker's friend, I never thought I would see the day.

Proinsias De Rossa

It is targeted at dealing effectively with child poverty. The Opposition should end this charade of pretending on the one hand that not enough is being spent on social welfare, while on the other, arguing that too much is being spent. While the Opposition supports the increase in child benefit, it argues that some of it should have been used to provide a 30p increase for pensioners.

Dr. Woods

The Minister misrepresented what I said. I made it clear that those suffering most from poverty were in receipt of unemployment assistance and supplementary welfare allowance. It would not have been difficult to have found some money for them in addition to the money expended on child benefit. That is our difficulty with the Minister's approach.

The Minister challenged me to say where money was available. Money is available in the social insurance fund which had a surplus of £50 million. That money would have been available to the Minister to bring unemployment benefit and other insurance based payments up to the main rates if he had wished to do that or if it had been his priority, but it was not used for that purpose. If the Minister had used that money for increases in the social insurance area, budgetary moneys would have been available to provide further funds for unemployment assistance or in the assistance area generally.

There were various ways in which the Minister could have made extra funds available if he had wanted to but he did not look after old age pensioners or those on the lowest payments of unemployment assistance, supplementary welfare allowance and other means tested low payments, which need to be further improved. Although they have increased slowly over the years, there should have been a further increase this year.

To provide funds needed for his objectives or the requirement which the courts placed on the Government in relation to equal treatment, the Minister said a once off payment must be made this year. It is not a once off payment, one does not get £200, £140 or £160 million on a once off basis, it must be paid back. It does not come out of thin air. The Minister used this as an example to say that such funds could not be any use to him. If he had borrowed more from that, £50 million could have been made available from the fund to do what he wanted in the budget. He had various means available to him.

It is not for the Opposition to say to the Minister how he should spend the money or where he should find it, but we must highlight the damage he is doing to the status and position of old age pensioners. As Deputies Joe Walsh and Flood said, we welcome the increase and support it, but we must point out that it helps only a proportion of the unemployed and old age pensioners.

Question put and agreed to.

NEW SECTION.

Chairman

Amendments Nos. 3 and 12 are related and may be discussed together. Is that agreed? Agreed.

Mr. Clohessy

I move amendment No. 3:

In page 5, before section 6, but in Part III, to insert the following new section:

"6.— No pay-related social insurance contributions shall be payable by any married women in respect of any payment to her of arrears of social welfare payments arising by virtue of the failure by the State to implement EC employment equality legislation.".

This amendment is designed to find out if the Government intends taxing the social welfare arrears which will be paid to married women arising from the EC equality directive. These payments should be treated on the same basis as they would if paid when they should have been and I understand they would have been tax free. The Government should pay up and accept that it cannot give the money to the women with one hand and take it away with the other. These women have waited for a long time for that money and it should not be taxed.

Proinsias De Rossa

Section 6 provides for changes in the rates of social insurance contributions payable by employers and employees and provides that employees who are insured at class A — paying the full rate of PRSI — will not be liable for a contribution in respect of the first £50 or weekly earnings or an equivalent amount in the case of an employee paid other than on a weekly basis. This section will benefit those on low pay.

These amendments are not necessary because social welfare payments are already exempt from liability for PRSI. Employed contributors pay social insurance on their reckonable earnings which are defined in section 2 of the Social Welfare (Consolidation) Act, 1993, as earnings derived from insurable employment or insurable occupational injuries employment. Self-employed contributors pay social insurance contributions on their reckonable income or emoluments. "Reckonable income" means income to which schedule D tax applies, while "reckonable emoluments" means income to which PAYE tax applies other than income from employment under a contract of service. Regulations exclude social welfare payments from the definition of reckonable emoluments so these amendments are not necessary and the payments to which Deputy Clohessy referred will not be liable to PRSI.

Amendment, by leave, withdrawn.