Covid-19: Impact on the Fiscal Position (Resumed)

We are joined this afternoon by representatives from the Departments of Employment Affairs and Social Protection and Public Expenditure and Reform to discuss the impact on the fiscal position. From the Department of Employment Affairs and Social Protection, I welcome Mr. John McKeon, Secretary General, Mr. Ciarán Lawler, assistant secretary and Ms Aideen Mooney, principal officer. From the Department of Public Expenditure and Reform I welcome Mr. Robert Watt, Secretary General, Mr. Ronnie Downes, assistant secretary and Mr. John Kinnane, principal officer.

I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

We expect witnesses to answer questions asked by the committee clearly and with candour but witnesses can and should expect to be treated fairly and with respect and consideration at all times in accordance with the witness protocol. If witnesses have any concerns with how they are being treated I ask that they raise them. I ask Mr. McKeon to confine his opening remarks to five minutes as we cannot be here for longer than two hours.

Mr. John McKeon

I thank the Chair and the committee members for the invitation to speak today. I am joined by my colleagues, Mr. Ciarán Lawler and Ms Aideen Mooney. With the Chair's permission I may rely on them in responding to questions.

In a normal year, we typically receive 200,000 jobseeker claims. In a normal month we receive about 100,000 claims across all of our schemes. In response to the Covid-19 crisis the staff of the Department has processed more than 1.2 million claims from more than 730,000 people thus far. Solely in the five-week period from 13 March, the staff dealt with and quickly got into payment more than four years' worth of claims under a new scheme, the Covid-19 pandemic unemployment payment, which was itself designed, developed and implemented in a matter of days.

We also introduced a new illness benefit payment, worked with Revenue to develop the temporary Covid-19 wage subsidy scheme and revised processes for community welfare services. We set up and staffed new call centres to respond to millions of queries and deployed new online service systems. Visits to our website, use of our online services and calls to our call centres exceeded those to all other organisations. On average we received an online application once every 40 seconds.

To facilitate all of this, staff worked on emergency legislation to enable us to provide payments, modify redundancy arrangements and operate the civil registration service. None of this could have been achieved unless staff members continued to come to work at a time when public health advice was to stay at home. I thank them for their commitment. Their demonstration of real public service values has been exemplary.

It was not just our staff. I also acknowledge and thank the 350 staff of other Departments who came to work with us and our colleagues in the Revenue Commissioners, who took on the development and administration of the wage subsidy scheme.

There is now no doubt that the measures taken to flatten the peak and reduce the impact of the pandemic on demand for health services had the effect of transferring that peak into the labour market and that demand onto the Department’s jobseeker supports. On Friday, 13 March, more than 20,000 people arrived at our Intreo centres to submit jobseeker claims. As it was clear that we could not cope with that level of demand, over that weekend we developed and commenced implementation of what would become the pandemic unemployment payment, PUP.

We initially introduced the payment at the standard jobseeker rate of €203 per week, with the intention of quickly revising the payments to claimants with adult or child dependants to put them on the appropriate higher rate soon thereafter. However, it soon became apparent that even this would not be feasible and we were concerned that people in multi-person households would be disadvantaged by having to depend for some time on the payment rate for a single adult. We also were concerned that even with a simplified process, we might not be able to clear all claims if, as seemed likely, further restrictions would be imposed. We also wanted to do what we could to avoid breaking the link between employers and workers.

We therefore modified our approach by formally establishing the PUP as a flat-rate payment of €350 and introducing what ultimately became the temporary wage subsidy scheme. The higher rate of €350 per week was set to match the standard jobseeker rate for a two-person household. In addition, it was aligned with the average salary level in the two most affected sectors, retail and hospitality, thereby mitigating the loss of employment income for many people.

Since the introduction of those payments, a number of changes have been made or are planned. The subsidy payable under the wage subsidy scheme has been increased from 70% to 85% in respect of low-paid employees and the scheme was extended to cover people who were on maternity or illness related leave prior to Covid-19. In the case of the PUP, the payment rate is to be more closely linked to prior income. The €350 flat rate resulted in people who had previously only worked a few hours per week receiving payments in excess of their prior income and in excess of what they would normally expect as a jobseeker payment. This has obvious consequences in terms of costs to the State. Arguably, it also undermines the integrity of the social protection system as an equitable and effective method of income distribution. We know, for example, that many part-time workers are second earners, including student workers, in higher income households. Therefore, the Government decided that people whose earnings were less than €200 per week will move to the standard jobseeker rate of €203 per week from the end of this month.

The Department has also implemented other measures in response to Covid-19. It introduced the special Covid-19 illness benefit payment from which more than 51,000 people have benefitted. The waiting days period for this illness benefit and for jobseeker payments were waived. Recognising that people cocooning at home would incur additional heating costs, the fuel allowance season was extended by four weeks. We also made changes to the rent supplement process and an additional 5,700 people have been benefiting from rent supplement support since the start of March 2020.

The Government has announced that the measures taken to date, originally intended to last for 12 weeks, will be extended to August. How they change and develop over coming months will depend on progress in suppressing the virus and restoring business activity. It will also depend on the ability of the State to finance the extraordinarily high levels of expenditure being incurred. The Department is likely to exceed its original budget by some €10 billion. This increase alone is greater than the full Estimate for all Departments with the exception of education and health. At a likely outturn of €30 billion, the Department will this year spend over €15,000 for each worker or, put another way, for every €1 that is forecast to be raised in income tax this year, we will spend about €1.60 on social welfare. This is the context for future decisions.

There are, however, encouraging signs. It is encouraging to see the rate of new cases of Covid-19 fall and to see shutters raise and business reopen. It is also encouraging that from a peak of over 600,000 payments at cost of over €210 million per week, this week we will make fewer than 500,000 payments under PUP at a cost of about €175 million.

The Department’s focus is now turning towards helping people whose employment does not recover. We are therefore working with colleagues in other Departments to start the process of planning for the ramping up of employment services, training and other supports to people who may not get back to work in the short to medium term. We know from relatively recent experience that measures to support people to retain contact with the labour market and acquire relevant skills are critically important to preventing unemployment becoming entrenched.

I thank Mr. McKeon and ask him to conclude, if possible.

Mr. John McKeon

That is fine.

The first speaker is Deputy Foley of Fianna Fáil. I apologise, we are going to hear first from Mr. Watt and then committee members will ask questions. I apologise; it has been a long day. I thank Mr. Watt for coming in.

Mr. Robert Watt

I thank the Chairman. I will start with a brief statement

The Covid-19 pandemic has had a profound impact on our society and economy. To respond to this crisis, the Government has agreed over the past few months a series of expenditure measures to support our health service in expanding its capacity, to provide income support to workers who have lost their jobs over this period, and to support firms to maintain employment and the vital link with their employees through the wage subsidy scheme. The evolving nature of the public health situation has required that Government act quickly to address the challenges facing our citizens.

From an economic perspective the labour market has borne the brunt of the impact. In the early part of the year, we were in a position of almost full employment. At the end of May, the Covid-19 adjusted monthly unemployment measure produced by the CSO showed the unemployment rate at 26%. In these circumstances, the Government has taken significant steps to cushion, where possible, the impact on households and firms. These supports seek to minimise the potential long-term effects of the crisis on our economy. By supporting the connection between workers and employers and providing targeted supports to business, the objective of policy has been to facilitate business restarts as public health restrictions are eased.

The SPU, published in April of this year, outlined projected overall gross voted expenditure of €78.4 billion for 2020, including an additional €8 billion across a variety of areas. Taking into account the social protection Estimate agreed by Dáil Éireann last month, and Government decisions since the SPU was published, in particular the extension of the PUP and the TWSS, the additional expenditure, relative to last December’s Revised Estimates is now estimated at approximately €11.5 billion, which is that amount higher than that forecast last December. These projected increases are subject to considerable uncertainty given the evolving employment situation as businesses restart. These additional expenditures will bring gross voted expenditure for 2020 to €82 billion, an increase of more than 20% relative to last year, which is probably the largest increase in nominal spending that we have ever had.

The forecasts in the stability programme outlined a general government deficit of €23 billion or almost 7.5% of GDP for this year. This reflects the expenditure measures introduced as well as the effects of the automatic stabilisers as revenues fall and unemployment spending increases. However, there is a high level of uncertainty as to the outcome for this year. A delayed recovery in the economy, for example, could result in a deficit of up to €30 billion this year.

The State will borrow to cover this deficit this year and for as long as is required. We can afford to borrow cheaply on this scale in support of our economy and our people because of the actions of the ECB and the credibility of our approach to the public finances.

In response to this crisis, the Government moved swiftly to introduce a range of measures. During this period, the normal procedures for advance sanctioning of expenditure by the Minister for Public Expenditure and Reform via the Department remained in place. Under these arrangements, sanction requests for funding to support rapid actions were analysed, assessed and responded to in an efficient and streamlined manner to expedite necessary expenditures agreed by Government. Specific streamlined arrangements were put in place between the Department of Public Expenditure and Reform and the Department of Health, and involved regular reporting on Covid-19-related health expenditure. This is important as clear, rapid, targeted and properly resourced public health measures have been, and remain, a crucial element of the response to this pandemic.

To date, more than €1.8 billion in additional funding has been agreed by the Government for the Department of Health. This funding has supported the scaling up of acute and community services, including expanding physical capacity and the purchase of equipment such as ventilators and PPE. This funding is also being used to provide support to private and public nursing homes, and secured 100% of private hospital capacity during the peak of the crisis.

Outside of the health area, economic measures included the wage subsidy scheme and the PUP, various liquidity measures, direct grants for impacted small and microenterprises though the restart grant scheme and the trading online voucher scheme, deferral and warehousing of tax liabilities for a 12-month period through the Revenue Commissioners, and a targeted commercial rates waiver for a three-month period through the local authorities. The Government has indicated that further supports will be required for small businesses to aid the economic recovery.

As the Revised Estimates for 2020, which set out the allocations for the year, were not voted on prior to the dissolution of the previous Dáil, Departments are currently operating under the ‘four-fifths’ rule that applies under the Central Fund (Permanent Provisions) Act 1965.

As we are pressed for time, I will skip ahead and make a few final comments. On fiscal sustainability, underpinning the strategy to be adopted in the recovery phase, the management of voted expenditure needs to continue to be conducted in a manner that meets the Government’s targets for fiscal sustainability and continued improvement in public service outcomes. The State is well placed to borrow to fund the deficit arising from the crisis. This is against a backdrop of currently favourable financing conditions and the backstopping role of the ECB.

The cost of borrowing money is cheap but this must be seen in the context of an expanding volume of public debt. With gross public debt projected to head toward €250 billion, an average interest rate of less than 2%, which is the current position, generates an annual debt generate interest bill in the range of €4 to €5 billion. An average rate of 3% could see that annual bill go to €7.5 billion, while an average rate of 4% could generate a bill of €10 billion. It needs to be considered, therefore, that over the medium to long term - not this year or next year - Ireland will issue and refinance this debt against a less favourable background. As we move into the recovery phase, in the future a robust fiscal anchor will be required to ensure sustainable growth in Exchequer spending.

The substantial emergency measures introduced in the early stages of this crisis have had a significant expenditure impact. They played a crucial role in supporting households and enterprises and the scale and magnitude of these supports was essential. As we move forward, that context is changing for reopening the economy. Now our focus needs to be on supporting the economy to transition out of the crisis phase and into recovery. This means prioritising measures that will stimulate activity and employment. This will not be an easy task, as the broader context in which these decisions must be made remains challenging. In addition to the significant uncertainty that exists around the medium to long-term impacts of the virus, the uncertainty that is now present in the global economy presents a particular challenge given the openness of our economy. These challenges highlight the importance of maintaining fiscal accountability and of framing our policies within the broader fiscal considerations. At the beginning of this year, the public finances were in a strong position. In considering our expenditure strategy for the future, our aim must be to move back towards that position over time as the economy recovers.

I thank Mr Watt, and apologise to him again.

I apologise also to Deputy Foley, who has five minutes.

I thank the Chairman. I welcome the witnesses. I will begin by acknowledging, as Mr. McKeon referenced, the put-through of 1.2 million claims from 730,000 people over a short timeframe. That was phenomenal put-through. I want to acknowledge the outstanding work of those in the Department of Employment Affairs and Social Protection, especially those in the local offices. I am very conscious that many of the staff were coming in at 6 a.m. to deal with ever-changing demands, changes in payments and everything else, making themselves accessible and very much being on the front line. They are not always recognised as being on the front line but I recognise it, and I would like to acknowledge that sterling service.

I would like to ask Mr. McKeon a very specific question about the PUP and arrears associated with that. There are many cases of arrears. I want to know what accommodation is being made going forward to ensure that payment is made.

Mr. John McKeon

I thank the Deputy. The Department will pay back any arrears that are due to be paid. We hope to do so as quickly as possible. However, the issue of arrears may not be as large as people think. To give a practical example, most people were laid off on a Monday and they did not receive a payment that week but they received a payment the following week and, as a consequence, believe they have missed a week. In practice we pay the payment one week in arrears and what is happening now as people go back to work is that they are finding they are receiving a payment in the first week they are back in work, so the issue of arrears is probably just a little exaggerated.

The processing of arrears will happen over the next number of months. We have to review all 730,000 people who applied, including the 688,000 people who received the payment. We will have to review all of those claims on an individual basis. We are in the process of writing an IT programme to try to automate that as quickly as we can. At this point we still have a huge volume of work processing the nearly 500,000 payments that we are making every week, managing moves from the PUP onto the wage subsidy scheme and back, and so on. We have to prioritise getting the payments that are in place out and make sure that happens. It will take some time but we anticipate that we will start making payments of arrears in quarter 3.

I appreciate that. I have just realised that I have six minutes. I have a very specific question, one that I have raised at every session today. It concerns a sector of workers that I feel have been lost in the pandemic, namely seasonal workers.

I must raise their case. I am from a tourism county - Kerry - where there is a huge number of seasonal workers who have lost out with the pandemic unemployment payment. We have little knowledge of how their industry will improve in coming months. Seasonal workers traditionally work in summer so they have their stamps for winter but their stamps are running out. What measures can be taken to support seasonal workers? That question is for Mr. Watt or Mr. McKeon.

Mr. John McKeon

The issue of seasonal workers has been raised with us. The eligibility conditions for the pandemic payment, like the normal jobseeker's payment, is that a person was in employment immediately prior to claiming the payment. It is very difficult. While I appreciate the issue, the Deputy will understand the difficulty we would face in trying to distinguish or identify potential but unrealised employment and separating genuine cases from others that might not have happened.

Sorry to interrupt, but would it not be acceptable in the case of seasonal workers who would be in a position to show that they have a history of seasonal work and could prove it from previous years?

Mr. John McKeon

There would be people who work seasonally one year but not the following year and so on. There is another factor which is germane to this. We had full employment prior to this. People who were claiming jobseeker's payments in January, February and early March continue to have access to those payments. They claim those payments on the basis that they could not get employment during January, February and March, yet we know the economy was at full employment and we had thousands of vacancies. It creates a difficulty if those people say that they could not get a job back then when we know there was quite a lot of employment around. We must be careful. It is something that would be possible to change but that would require a change in the law and how we operate jobseeker's payments.

I thank Mr. McKeon. I am sorry, but I only have another minute. This is something that should be examined by the tourism task force. It is a forgotten sector. I wish to raise the case of two other groups, namely, those over 66 years and students who would traditionally have worked over the summer to help themselves through college. They are not in a position to do that as the jobs are not there. They are not eligible for any payments.

Is the Deputy taking additional time?

I am taking six minutes. Is there scope to do something specifically for students and those over 66 years?

Mr. John McKeon

Generally, students do not qualify for jobseeker's payment during the summer period between school or college years. The pandemic unemployment payment is effectively the jobseeker's payment and the same conditions apply. Therefore they are not eligible. If there are real issues for students, I am not sure the pandemic unemployment payment is the mechanism through which they should be addressed. I acknowledge there are people who might have had an anticipation of employment and of saving during that period and who may not now get access to that employment, which might create difficulty, but I am not sure that making an unemployment payment is the best method by which to address that. We are still struggling to fill jobs in some sectors, including horticulture, care and some areas of retail, so there is work available. I do not want to overstate it but that should be borne in mind. The other issue is that many students have been in receipt of the pandemic payment in recent months. They are issues that need to go into the mix and which the Government must take into account when considering these issues.

As I noted in my opening statement, the pandemic unemployment payment was a quick, rapid-fire way of getting a jobseeker's payment in place. The standard rule of jobseeker's payments is they apply to those between 18 and 66 years. The State income support paid to those over 66 years is the State pension. That is still available. Those are the rules of the game. A change to that would be a fairly fundamental change to how the social welfare system is constructed and would require legislation.

I welcome Mr. McKeon and Mr. Watt.

Most of my questions are for Mr. McKeon but I have one question for Mr. Watt that I might put first. At one of our previous hearings, there was some discussion on the deal that was struck between the State and private hospitals. We know that the negotiators from the State side were the Department of Health and the HSE. As we will have further sessions on this issue in the coming weeks, I seek clarity on whether the Department of Public Expenditure and Reform had any role in the process. Was the Department required or asked to sign off on the contract that was eventually agreed and did the Department have any input at all into that particular arrangement? Perhaps Mr. Watt could provide clarity for us on that issue.

Mr. Robert Watt

We were not involved in the negotiations. As Deputy Cullinane said, those matters were dealt with by the Department of Health and the HSE. We discussed the matter in advance with the Department of Health and, ultimately, we gave sanction for the decision to go ahead with that. While we were not involved in the actual negotiations we were aware of the discussions taking place. Sanction was provided for the funding to enter into that deal.

I thank Mr. Watt very much for that.

I wish to put a number of questions to Mr. McKeon. The first question relates to unsecured household debt and whether the Department has done any recent analysis or research on the level of unsecured household debt in the State.

Mr. John McKeon

No, we have not done any research in recent times, certainly not since the Covid crisis, on the level of unsecured household debt. As Deputy Cullinane is aware, the Citizens Information Board and the Money Advice & Budgeting Service, MABS, are agencies of the Department and that is a matter they would typically examine. I can tell the Deputy what he probably already knows in terms of what is in the public discourse, which is that the overall level of household debt is reducing and the overall level of savings is increasing. Of course, I always give a caveat to those answers because while that might be true at an aggregate level, for the people in respect of whom it is not true, that aggregate does not give them any comfort. I often make the point that even if unemployment is just at 4% or 5%, the people who are unemployed are 100% unemployed and I guess the same thing applies in the context of household debt. So overall-----

When was the last time anyone in the Department at Mr. McKeon's level, or senior level close to his, had discussions with the Citizens Information Board or the head of that board on household debt?

Mr. John McKeon

I cannot say. A member of the management board of the Department is a board member of the Citizens Information Board, so it would be discussed at that level. I am not a member of the board myself so I cannot say when that-----

In terms of policy responses, obviously the Department would have a role, so it might surprise Mr. McKeon to learn that I did have a meeting with the head of the board recently and she indicated that in her view, we are heading towards a tsunami of household debt, especially for low-income households, as a consequence of Covid because of the holiday on rents, mortgages and possibly unpaid utility bills. There is a real concern that some of those families will be vulnerable and might end up having to go to moneylenders and all of the issues that arise from not dealing with household debt. Would it not be appropriate for the Department to look at these policy responses? I know there has been some commentary as well about the State, possibly through MABS, having public personal insolvency practitioners, PIPs, to deal with people who have unsecured household debt, especially for low income families. If it is a concern for the Citizens Information Board that we could be looking at a tsunami of debt in September, would it not be prudent for the Department to look now at what policy responses might need to be put in place to deal with that tsunami if it does come?

Mr. John McKeon

Absolutely. If the chair of the Citizens Information Board comes to the Department, we will certainly engage with her on that. A number of policy responses are already in place. We fund the personal insolvency practitioners and we provide rent supplement and other supports, so there are payments and supports available. If they need to be enhanced, developed or expanded or if more resources need to be put into it, that is certainly something we would consider on the advice or recommendation of the Citizens Information Board.

In terms of the conversations I have had, what the board says is that there is a structure and architecture there to deal with secured debt and mortgages but not so much to deal with other kinds of debt, especially unsecured debt.

That is going to be a big issue and a potential problem on which work needs to be done.

On the living wage, does the Low Pay Commission come under the remit of the Department of Employment Affairs and Social Protection?

Mr. John McKeon

The Low Pay Commission is a body under the Department, yes.

If the State was to move towards a living wage, does the Department have its own metric or modelling for what would be an hourly living wage rate?

Mr. John McKeon

The Department, as the Deputy may be aware, funds the work of the Vincentian Partnership for Social Justice on the minimum essential standard of living. This work informs the living wage. That is how we do that work. We fund the partnership and rely on its figures and analysis. We are very pleased to fund that work and believe it is a high quality piece of work.

We can see in the public domain what might be coming down the road with regard to the living wage. How quickly we get there will be an issue. It is very important, as a starting point, that the Department has a clear understanding of what the rate will be. Is Mr. McKeon saying that the Department has not done work on that yet? All of the Government responses have been to increase the minimum wage. That is the issue considered by the Low Pay Commission which does not look at the living wage. The living wage technical group, which is part of the Vincentian Partnership for Social Justice, sets what it considers to be the living wage rate. At the moment, it is €12.30 per hour. Is that the figure the Department will work from?

Mr. John McKeon

We would certainly work with its analysis. One must be careful about taking a very simplistic analysis, and I do not suggest that the Deputy has done so. If one looks at the work of the Vincentian Partnership, it has produced more than six figures - I think it may be in the region of nine or ten different figures - based on household types, localities and so on.

Another issue that is often overlooked in discussions on the living wage and the minimum wage is that many people on the minimum wage are second earners in high income households. Analysis by the ESRI and others shows that increasing the minimum wage has a negligible impact on the incomes of lower income households and the reduction of poverty and actually has a stronger and higher impact on better off households. I would be careful, therefore, about how we interpret the data.

I did not give any analysis or opinion on what I felt the figure was. I asked what the view of the Department would be. Mr. McKeon stated that we must be careful because different rates might be needed to take on board different circumstances for individuals, where people live and so on. That is fine. I am trying to understand what the perspective of the Department would be, in the event that he State commits to moving to a living wage, on what architecture it will use, what the potential rate will be and whether there will be multiple rates because, as Mr. McKeon put it, the matter is complex. I accept that. I was only looking for the information. In order to gain a better understanding, has the Department considered changing the composition and terms of reference of the Low Pay Commission to have it look at the living wage?

Mr. John McKeon

As the Deputy will be aware, the terms of reference for the Low Pay Commission are set out in legislation. We have not looked at changing those terms of reference. I am aware of the public discourse around the putative programme for Government and the commitment in that to a living wage. Certainly, that is something we would have to look at if that programme for Government is brought to fruition. We will look at it at that time.

Does Mr. McKeon accept that there is a clear distinction between increasing the minimum wage and moving towards a living wage?

Mr. John McKeon

There is a distinction between the two. If one increases the minimum wage, by definition one is moving towards the living wage. An increase in one will bring one closer to the other.

That is interesting. I understand that JobPath was extended until the end of the year and there is an option to extend it further. Is there a plan to extend JobPath beyond the end of the year?

Mr. John McKeon

No. At this stage, the referrals to JobPath will stop at the end of this year. No decision has been made with respect to any extension or otherwise of JobPath-----

That is an answer to a different question. Mr. McKeon said no decision was made. Is it definitive that there will not be an extension or is there a possibility that a decision will be made to extend JobPath further?

Mr. John McKeon

The Deputy is asking me to speculate on what a new Government and new Minister might decide. I cannot do that. It is certainly an issue that will be on the table.

I thank Mr. McKeon.

I thank both Mr. McKeon and Mr. Watt for the work that they have done at this difficult time, as well as all the staff in the Departments and all the offices around the country. It has been a challenging time for everybody. There has been a huge input made in time and commitment and dedication to the job and that needs to be acknowledged.

Mr. McKeon was giving us figures on the number of people who have benefited under the Covid payment. Is there any idea at this stage of the number who will end up in long-term employment for a period of time greater than six months from the end of April last? I wonder whether we have an idea of the kind of numbers we will be talking about. For instance, today I received a few calls from people where small businesses are not reopening because of new regulations coming in or in trying to comply with Covid requirements, it is not physically possible for them to reopen. Have we an idea as to the numbers of people we will see in six months' time who will not be back in employment?

Mr. John McKeon

The figures we are working on at present are those that were published in the stability programme update. The stability programme update is forecasting an unemployment rate at the end of the year of just under 10%. If memory serves me correctly, there is an average for the year of approximately 14%. At 10% unemployment at the end of the year, one will be looking at a figure of approximately 400,000.

In respect of that figure of 400,000 and on the basis of the high numbers of young people affected at present, what is the prediction on the number who will be under 25?

Mr. John McKeon

At present, I envisage that the number of those under 25 probably will be the first to reduce, and will reduce most dramatically. Generally speaking, in any period of unemployment young people tend to be the first who are impacted but also in many ways the first to recover. We anticipate that to repeat. I cannot put a precise number on it but I know, for example, that the current cohort of people who are on pandemic unemployment payment, PUP, includes a fair number of students whose colleges closed in March. As the education sector reopens, one will find that many of those will go back into education and I expect the number to reduce.

Obviously, some of those will not be going back into education because they have finished their education, either at second level or third level. Have plans been put in place by the Department as regards new initiatives to help young people who are running into difficulties in trying to find employment through apprenticeships or further education? Has the Department looked at that area as of now?

Mr. John McKeon

Yes. We started a programme of work on that with our colleagues in the Department of Education and Skills. It is likely - these will be decisions for an incoming Government - that one will see an increased emphasis in the next number of months on programmes that will help people, not only young people but all people, to reconnect with the labour market directly through employment and work placements, through specific skills training programmes or through back-to-education allowance schemes. There is a suite of measures which are standard in any public employment response and we certainly will be looking to ramp those up.

For instance, when we had very high unemployment previously, we set up a scheme whereby people had a direct link to someone every month to try to assist them in finding employment. Do we now need to increase the number of people who will be able to give assistance?

Mr. John McKeon

We more than likely will. At present, we have approximately 150 people in the local employment services, 300 people in our own Department and approximately 600 people in JobPath service providers who are currently supporting unemployed people and providing that monthly meeting to which the Deputy refers. That is at a ratio of 200 jobseekers to each case officer.

With the likely increase in the unemployment figures, that ratio will increase to 400:1. It is probably not sustainable to offer a service at that level. It is therefore likely that we will increase resources through the Department, the local employment services or another mechanism. We will have to have a look at how quickly the labour market responds first. One of the tricks is not to respond with overprovision in anticipation of the worst only to find that the labour market responds more quickly than expected. The next few weeks will be telling.

I will go back to the Department of Finance with regard to the recovery of revenue. I have received many complaints from people who import vehicles. They are finding it difficult to get vehicle registration tax, VRT, clearance. This is particularly the case in Cork. As a result of the backlog, it appears that there is quite a long delay in getting assessments for VRT. This is income for the State at a time when it is needed. Has there been any decision taken to increase the amount of such work done by the various units around the country? Will that area be examined in view of the fact that such an action would physically bring in money?

Mr. John McKeon

That area is not within my remit. I believe it is within the remit of the Revenue Commissioners. I will certainly bring the Deputy's query to Mr. Niall Cody, chairman of the board of the Revenue Commissioners. I will make him aware of the Deputy's query and perhaps he can respond directly.

The area of bringing in finance that should be paid to the State is important. Is now not the time to ensure that we dot the i's and cross the t's to make sure that there is sufficient money coming in where it is available and where it should be coming in? One such area relates to VRT. My understanding is that there is quite a substantial delay and that the State, therefore, is at a loss as a result of the finance not being available.

Mr. John McKeon

I certainly understand what the Deputy is saying. In principal, it is absolutely correct. As I have said, I am not in a position to comment on the resourcing of the vehicle registration tax service but I will bring the issue back to my colleagues.

I have a question for Mr. McKeon. Has any further consideration been given to those over 66 who are on pensions but who have been working out of a need to meet mortgage requirements or because of family splits which have had a financial impact upon them? These people are denied the PUP. This is a real anomaly which has affected many people. I am interested in whether there has been any further discussion within the Department on revisiting this big gap with regard to the provision of this payment.

I also want to acknowledge the work of the Department and its officials throughout the country over recent months. It is hard to comprehend just how much work its staff have done and the Herculean efforts they have undertaken. I should have put that on the record at the start.

If the Department is to maintain the level of supports and administration outlined in its opening statement, will it have to increase its level of staffing to function at the higher level it has reached in handling the pandemic payment? Will a new recruitment scheme for the Department be needed?

Has the Department encountered many problems with people's inability to acquire public services cards or to attend offices because of public health guidelines and restrictions during this period? What kind of impact has that had?

Mr. John McKeon

I thank the Deputy. He may have seen me smile when he asked the question about staffing while I was in the same room as the Secretary General of the Department of Public Expenditure and Reform. He has given me an ideal opportunity, although I will not take it up.

On the issue of staffing in the Department, we had a Herculean effort to respond to a tsunami of claims. Hopefully we will not have to go through that again and things should settle down to a level that is manageable within the existing staff resource. One of the things we have done during this period is accelerate the roll-out of online systems, which has been extremely helpful and which will probably help us to sustain service at the correct levels in the immediate future. We may have to look at the allocation of staff between different types of functions, for example between employment services and claim processing. We may look to do some rebalancing there. Without selling the pass, and I may well come back to my colleague, the Secretary General, Mr. Watt, at this point I am comfortable that we are okay with the staffing we have got.

With regard to the over-66s, to repeat a point I made earlier, the pandemic unemployment payment is beginning to take on almost a mythical status as being possibly the solution to every type of revenue and income deficit and being capable of covering every type of cost that might be incurred. The pandemic unemployment payment is a jobseeker payment. It was a fast way of delivering jobseeker payments at a time when the Department could not possibly put everybody through the rigours of a full jobseeker assessment. It mirrors the jobseeker conditionality which applies, namely, over 18, under 66 and resident in the State. Right now there is no intention to change that, although it would be a matter for Government and the Oireachtas ultimately.

The provisions the Oireachtas has made for people who are over 66 is to give them a payment which is conditional primarily on age. Everybody over 66 resident in the State is eligible for that payment. That is the income support payment. There are no barriers to getting it in terms of the kind of scale we had on the jobseeker payments. Someone who is over 66 does not face difficulties in getting access to the pension payment. If their income conditions change and they need to have the payment re-rated there are no difficulties in getting access to that. It is also important to bear in mind that we set the jobseeker pandemic unemployment payment at the rate for a two-person household because we did not believe it was fair to disadvantage multi-person households by only paying the single person rate. The two-person household rate for the pension payment is still significantly more than the two-person rate for the Covid payment. They are not actually disadvantaged. Another thing is that we have a safety net to the safety net, which is the supplementary welfare allowance system. We have been very public in saying to people who are over 66 that if they are in financial difficulties, they should come and talk to us. Thus far, 137 people over 66 have come in, even though we publicised that service. A final point is that people over 66 have access to the temporary wage subsidy scheme because that is a payment to the employer, not to the individual. I think the Government has determined there is sufficient provision at this point. Obviously, were that to change, we would require legislation, which is a difficulty at this point in time.

With regard to the public services card, we postponed registrations for social distancing reasons and because we needed to divert staff onto claim processing for the pandemic unemployment payment. We have recently restarted that process. We trialled a number of public services card registrations over the past weeks using a new socially distant method. With the support of the union and staff representatives we are currently talking to, that is something we hope to expand in the coming days.

I extend our enormous thanks to the staff in Mr. McKeon's Department. Their Herculean efforts certainly ensured that the suffering of many people during the time of crisis was alleviated somewhat. On the statement Mr. McKeon provided to members, I take umbrage at one of the remarks in it. It has been much discussed that some people who happened to be earning less than €350 ended up earning €350 during the time of the pandemic payment. I refer in particular to Mr. McKeon's comments that arguably, this undermines the integrity of the social protection system as an equitable and effective method of income distribution. I disagree entirely with that. The Secretary General went on to state that the Government therefore decided that people whose earnings were less than €200 per week would have their payment reduced to €203. A number of sectors were excluded from this payment and the people concerned believe they have been treated unfairly as a consequence of some of the decisions made.

I refer in particular to students, especially those who worked one or two days a week in February or March and then had their income reduced, despite the fact that now, in June, they would have been paid €400 or €500 per week working full time. It is not unfair that they were being paid €350, which is not a miraculous sum. They are being unfairly targeted by this measure. What is Mr. McKeon's view on that? As a remedy for the unfairness, the eligibility for the PUP should become a qualifying criterion for the back to education allowance in September. It would add a modicum of fairness to the process if that could be done.

Mr. John McKeon

I ask that the Deputy ensures I answer all the questions because I have not managed to write them all down. With regard to the issue of the number of people who were earning less than €350 per week and then started getting €350 on the PUP, as I stated earlier we endeavoured to set the rate of the payment at €350 for two main reasons, the first of which was to provide an income support in respect of multi-person, and particularly two-person, households and not disadvantage them. That was the main factor in coming to that decision.

The other factor was to set it at the average earnings rate for people in the two most affected sectors, namely, hospitality and retail. In the event, approximately 50% of people who got the payment earned more than €350 a week and 50% earned less, a distribution one would expect when an average rate such as that is set.

On the issue of people who earned significantly less than €350 prior to becoming unemployed and whether that undermines the credibility and integrity of the social welfare system, I used the word "arguable". It is a subjective question of opinion as to whether it undermines it but I stated that because the point has been raised and a number of people - more than 10% of the recipients of the payment - had been earning less than €100 a week and were now on €350. That has been raised as an issue of equity and fairness. The question is why somebody who was previously working only one or two days or evenings a week is getting a payment of €350 a week when somebody who was working a full week receives the same sum-----

I asked Mr. McKeon about students, in particular.

Mr. John McKeon

I will come to the student issue now. They are questions that had to be dealt with and decisions had to be taken. The Government took a view and made the decision.

It is important to point out that students will still get €203 a week for the period between college years when, normally, students do not get any payment. While it may appear to be a disadvantage to them that the payment is being reduced, they are still at an advantage compared with where they would have been, for example, during the previous recessions, when they would not have received any payment. That may be cold comfort and it may not be perfect but, as I said earlier-----

Mr. McKeon might address the question on the qualifying payment for the back to education allowance.

Mr. John McKeon

That is what I am coming to. Issues will arise for people because of the financial impact of the crisis and the PUP should not be the mechanism through which they are resolved. If there are issues with funding courses and so on in the future, other mechanisms will potentially be available.

It has been determined that the period for which someone has received the payment will act to qualify him or her for the back to education allowance.

That is welcome.

I will ask Mr. McKeon some questions about the cut to the PUP. I am trying to get clarity about facts. I asked some of the following questions of the Taoiseach last week and did not get an answer. As a case study, Emma was working two days a week for eight hours and has one child. She was earning €192 a week pre-Covid-19, which was less than the €203 payment, and she was getting €222.50 per week in jobseeker's transitional payment. Her employment earnings were less than €200 but she was getting a jobseeker's transitional payment that brought her up to €417.50. Her payment was then cut to €350 with the introduction of the PUP when she lost her job due to the pandemic.

Will her pandemic unemployment payment be cut to €203, meaning she will be, therefore, forced to go back on to the jobseeker's transitional payment in order to go up to €239? In such a case, one is talking about someone going from €417.50 a week to €239 a week.

Mr. John McKeon

The Deputy has asked me a detailed question but I do not have the precise answer. I will come back to the Deputy with a written answer on that.

What we have done generally for people who are in receipt of employment income on most of our schemes, for example, disability allowance, carer's payment, working family payment, one-parent family payment, is that we have not adjusted their payment. We have basically allowed the pandemic unemployment payment of €350 to substitute for their employment income. Accordingly, in the case of someone like Emma, who was previously on less than €200 euro a week, she will still be better off even on the reduction than she would have been prior to that.

I will need to check the Deputy's particular question around the jobseeker transition scheme to see if that is one of the schemes which is covered. I will come back to the Deputy directly on that.

In the press statement from the Department, it was explicit that for those whose prior employment earnings were up to €199.99 per week, the pandemic unemployment payment rate will be €203 per week. Employment earnings is not there by accident. It is quite explicit. It is the case that those who were on less than €200 a week in terms of employment earnings are going to have their pandemic unemployment payment cut, regardless of how much they were actually taking in and reliant on in a weekly basis in terms of other social welfare payments and so on.

Mr. John McKeon

While the pandemic unemployment payment will be cut, it will be no less and, in most cases, it will be more than they earned through employment. If they had another social welfare payment, in general the position has been that such a social welfare payment continued unchanged. It will continue unchanged.

The Deputy asked me a specific question around the jobseeker transition scheme. I just do not have that information with me but I will check whether that is one of those payments.

I will take a more common case of a person on jobseeker's allowance. For example, someone is working two days a week on a minimum wage, getting just over €160 week and getting three days of jobseeker's allowance, bringing in a total income €290 a week. However, their employment income is less than €200. As I understand it - Mr. McKeon can correct me if I am wrong - that person is not entitled to claim for the three days of jobseeker's allowance when they are on the €350 pandemic unemployment payment. Is that the case?

Mr. John McKeon

That is the case.

Are they now going to be allowed to claim for three days for jobseeker's allowance on top of the €203 pandemic unemployment payment?

Mr. John McKeon

No.

In such a case, a person may have had a total pre-crisis income of €290, which then went up to €350. Now that will be reduced to €203.

Mr. John McKeon

They will be reduced to what their employment income was. We will examine those cases. For jobseeker casuals, what we have determined is that we will look at paying them casual plus the pandemic unemployment payment. Accordingly, they will be no worse off.

If it is based on the employment income, that they are going to be cut and not entitled to jobseeker's allowance on top of it, then they are going to be worse off.

Mr. John McKeon

No. I need to just check the issue with the jobseeker transition payment. For people who are in casual employment, we will actually pay the casual plus the pandemic unemployment payment. The commitment given was that people would not be worse off. I just want to confirm that is the case with the jobseeker transition scheme. It should be.

In the case of someone whose nominal wage, say in January or February of this year, was under €200 but was relying on tips to go over €200, is there a mechanism for the Department to take into account those tips?

Mr. John McKeon

No.

Well done to Mr. McKeon and his Department on their massive efforts to deal with the tidal wave of people who had to come to the Department's services due to the crisis.

Turning first to Mr. Watt, some of the figures with regard to the level of damage done to the economy are incredible. It is estimated that there will be a €30 billion deficit this year. Unemployment levels are around 26% currently. What levels of modelling and forecasting has the Department done with regards to unemployment, deficit and growth for the next three to five years? Maybe Mr. Watt could address that first.

Mr. Robert Watt

Macroeconomic forecasts accounting for GDP, GNI*, the labour market and what happens to the fiscal deficit are prepared by the Department of Finance. The latest numbers, which we have already discussed, would suggest the overall income of the economy will fall by upwards of 10% and that the deficit will be 7.5% of GDP, which is €23 billion. It could be more than that given the uncertainty over how quickly the economy will recover. The Department of Finance produces these numbers, and they have been set out. Everybody accepts and knows, however, that there is an unusual amount of uncertainty now over trying to project where the economy will be. There are just too many variables and unknowns at this stage. The numbers are the latest from the Department of Finance and the Department will prepare updated forecasts, not during the summer, as used to be the case, but with the budget in October.

Is it fair to say there will be a budgetary deficit for the next three years at the very least?

Mr. Robert Watt

There will be a significant deficit this year and next year. What happens in 2022 really depends on how the economy evolves and decisions the Government will take on spending and income tax. It really depends on how quickly the economy will recover and how quickly people will get back to work. Most of the deficit is of a temporary, cyclical nature. There will be a more structural and more permanent element to the deficit but we just do not know the figure.

Have any projections been made in regard to some of the variables that are being discussed? For example, there are people talking about a 100% return to school in the latter half of the year while some are talking about a much lower percentage. The latter would mean a significant number would still remain outside the labour force. Have any of these variables been included in the projections?

Mr. Robert Watt

As I said, the projections are prepared by the Department of Finance. It would consider the hit to employment. We are aware of the significant reduction in employment based on the number accessing the pandemic payment and the number still in employment who are benefiting from the wage subsidy scheme. Therefore, we have an idea that there has been a very significant hit to employment. The Department of Finance believes that by the end of the year, the unemployment rate will be reduced to around 10%. As has been mentioned, that is about 400,000 people, which is 200,000 more than at the start of the year. These figures are subject to considerable uncertainty, however. Not only will there be a demand impact but there will also be a hit to labour supply because people may not want to go back to work owing to childcare considerations or other responsibilities. There is a possibility that even if jobs become available, individuals may not take up the opportunities because of the childcare situation.

The reason I asked the question is that the memberships of three political parties are currently making big decisions on a programme for Government with significant expenditure elements within it. In reality, the information we have at present is that the country will be in significant economic difficulty for at least the next two and half years and that for the period after that, there is major uncertainty.

Bearing in mind recent items of expenditure, the initial wave of the crisis was expected to have been far higher. In fairness to the Government, much of the procurement was associated with getting the health service in order to deal with the expected wave. Thankfully, it did not materialise. I am talking about the private hospitals and facilities such as that at Citywest. What efforts are being made in the Department to make sure that expenditure on facilities that are not needed will be brought to an end as soon as possible to save the State money?

Mr. Robert Watt

Obviously, very significant decisions were taken very quickly based on a certain view on the number of cases and the effect of the likely surge on the health system. Thankfully, because of the efforts of citizens, we managed to avoid the very significant surge and ensure enough capacity within the system without having to access the new capacity that was acquired. The deal with the private hospitals, which could have been extended, ended after three months. Obviously, the decision was taken by the Government that that insurance policy was not required but, of course, negotiations will take place on what capacity might be needed in the event of a further outbreak or an increase in the number of cases.

What we are now doing, along with our colleagues in the Department of Health, is examining all proposals and options.

There are many issues relating to GP costs, the cost of testing and PPE. We are engaged all the time with our colleagues in the Department of Health, looking at the different challenges that the health system has and trying to figure out with them what is best from a health perspective, having regard to the fact that there is a value for money consideration and there is always a constraint regarding resources. Those conversations are ongoing. It is a difficult balance. Many quick decisions were taken for public health, especially in the earlier stages of this crisis. It was essential to do that. They were taken in a different context in a different way from how we would normally take decisions. We had to acquire the capacity in City West, in private hospitals and to do deals for PPE as quickly as possible. We hope, given the evolution of the disease and the number of cases, that we will get back to a more normal situation with regard to the relationship that we have with the Department of Health and the decisions that were taken about public health matters.

I thank the Departments for being here and the great work it has done to date. I also thank local social protection offices. They have been inundated with calls and must have found it very difficult. I have seen the statement by the Department of Public Expenditure and Reform indicating that specific arrangements were put in place between it and the Department of Health, involving regular reporting on Covid-19 related health expenditure. What was the health budget for the Covid-19 crisis and how much of it has been spent to date? Do the witnesses have a breakdown of the moneys that were spent?

Mr. Robert Watt

The overall increase in the allocation was €1.83 billion. That was the amount of additional expenditure that the Government approved. To the end of May, health spending was €1 billion above profile, that is €1 billion above where we thought it would be, and that relates to Covid-19. The overall expectation was that approximately €2 billion would be spent. We will see how that pans out over the next few months and what type of expenditure may have to be incurred in addition to what has already been occurred. As the Department of Health and HSE have mentioned to this committee, there are significant costs relating to testing. We have tested 370,000 people. There will be more testing and that capacity will have to continue to exist. There are more bills related to PPE. As the months roll on, we will see what the bills will be, but €1.83 billion has been allocated to the Department and we will see whether we are below or above that when we see the final bills.

I thank Mr. Watt. Has he a breakdown of how much testing costs?

Mr. Robert Watt

Some 370,000 tests have been completed. The costs are between €100 and €200. It depends on whether the laboratories in Germany or our own laboratories are used. I have a number in my head of between €400 million and €500 million but we can come back to the Deputy with a figure about that.

Those people who are over 66 and who worked up until the pandemic have received nothing. Is there any plan to rectify this situation in the future? These are the people who got up early in the morning, worked hard, built Ireland and have been left behind again.

Mr. John McKeon

I think I have covered that in answers to other questions. That is a matter to be determined by Government. As I pointed out when answering other questions, the pandemic unemployment payment is to substitute for jobseekers' payments, and the terms of those payments are that they are available aged between 18 and 66. In the past, people who were over 66 never sought access to the jobseeker's payment since the pension payment was at a higher rate. There is a concern that because the pandemic unemployment payment was set at a higher level, there may be a disadvantage. That is really to the advantage of the people receiving the pandemic unemployment payment, not to the disadvantage of people on pensions. I mentioned already that the pandemic unemployment payment rate was set at a rate for a two adult household. The pension rate of payment for a two adult household is about €471, so it is still significantly higher than the pandemic unemployment payment. I am not sure that there is a significant disadvantage. People who are in receipt of the State pension have access to other supports which are worth approximately €40 a week.

All of those things are in place. Some of the comparisons that are made in this regard are not properly informed. Any change such as the Deputy suggested is a matter for Government and there would be practical steps required, including changes to legislation, if we were to do it.

The hotel sector has made it very clear to me that for the sake of its very survival, the wage subsidy scheme will have to be reinvented. Does the Department have plans to do that?

Mr. John McKeon

The wage subsidy scheme is something that will be considered over the next while. The Minister for Finance has already announced that it is being extended to the end of August. Between now and then, the issue of the scheme and its future evolution will have to be considered. It is something that will be determined by a new Government.

My last question relates to the Covid-19 payment. I can well imagine the pressures Mr. McKeon's Department was under in this regard but politicians were also under pressure because we ended up being the first point of call for people in most cases. How can the Department make the liaison between itself and us politicians more successful than it has been to date? It is not good enough for politicians just to be handing over a telephone number and telling people to ring it. They feel that once they feed us the information, including PPS numbers and stuff like that, that we should have the answers. We are not able to give those answers at the moment.

Mr. John McKeon

I would say to the Deputy not to use the Covid-19 experience as evidence of the standard that normally applies. The other thing I should say is to thank Members of the Oireachtas for their support and forbearance and, at times, their patience. The issue we were faced with is that we took four and a half million telephone calls from people who are our clients and we had to prioritise them. We had more than 13 million queries through our website and more than 1 million online claims. We have had to prioritise service to our client base but we have done our best as well to give support through the temporary process that was set up with the Department of the Taoiseach and the Oireachtas instead of parliamentary questions. In the normal situation, each of our offices has a dedicated line which any Member of the Oireachtas can call and those calls are dealt with promptly by the person at the end of that telephone line. If a Member is making a query about a claim for carer's allowance, for example, he or she will be put through to the hotline in our carer's section, and the same applies in respect of disability allowance, pensions and so on. This is generally a service that is well appreciated by Deputies and we hope they will find, as the current pressure abates, that the service is more than adequate.

I start by acknowledging the work the Secretaries General and, in particular, their staff have done during the Covid-19 outbreak. Their two Departments have been critical to the national response and I want to acknowledge that. I do not imagine that either of the witnesses or their teams have had much time off. Their work is greatly appreciated.

I have two questions for Mr. McKeon, the first regarding the arts community and the second concerning a technical issue on which some people are getting caught out in respect of the wage subsidy scheme. The arts community is highly vulnerable to the impact of Covid-19. Many people working in the arts are in precarious employment in any case, with a lot of them having to be self-employed and to work very hard. There is not a huge amount of money to be made in the sector and it was one of the first victims of Covid-19 when restrictions meant there could be no live events, theatre shows and so on. I have quite a lot of anecdotal information from people working in the arts that they have struggled to access the unemployment payments. This seems to have come partly from a misunderstanding on the part of some of the staff who were issuing them. I fully accept that those staff have been under incredible pressure dealing with huge volumes of applications. However, to give an example, one writer was told they would not be allowed to access the payment and asked whether they could not just write a book, which belies an understanding of the situation. Will Mr. McKeon take that away and have a think about it? It might be down to internal departmental communications but I have had enough anecdotal evidence to suggest that there is not a sufficient understanding of the fact that those working in the arts really do not have opportunities to find alternative employment at the moment.

In regard to the pandemic unemployment payment, a lot of people working in the arts are looking at a very grim number of months ahead or perhaps even a grim year or longer.

I refer to people in the arts community who work on live large events, or even medium-sized events, even weddings, be it sound engineers, riggers, lighting technicians, lighting engineers or artists themselves. Is it the current understanding that the pandemic unemployment payment would be extended to them with an understanding that there is simply nothing they can do but wait for their sector to be revived once the restrictions have been relaxed?

Mr. John McKeon

I thank the Deputy. With regard to the initial comment he made about poor communications and so on, if he can send me an example we will certainly deal with it if he has got a specific case in mind. Generally, people in the arts community, whether it is musicians, visual artists or writers, are considered self-employed and they do have access to the pandemic unemployment payment, so I would be interested to see which people the Deputy is referring to and to get specific examples of difficulties to ensure it is something we can explore, if he has got those examples. There are also other supports available to artists. The Arts Council has introduced a payment - I think it calls it a response award - which is about €3,000. That is available to artists and to the artistic community as well. In general, self-employed artists can avail of the pandemic unemployment payment. I forget the precise terminology we use but they have to declare that they have suffered a substantial and real loss of income to apply, but once they can do that and stand over it, they are eligible for access to the scheme.

That is exactly my point. I am not basing this on one anecdote. I am basing it on a fair stream of people coming to me over recent months and I am suggesting that there might be an issue within the Department in understanding the complexities it is dealing with. The cases that have come to me would suggest that is the case. I know they are entitled to it, which is the point.

I am not asking for Government policy positions, but as Mr. McKeon understands the current policy, for those who have no real hope of returning to their professions in the coming months and potentially longer, is the current policy that the pandemic unemployment payment would continue to be extended to them?

Mr. John McKeon

The current status is that the Government has extended the pandemic unemployment payment and the wage subsidy scheme until August. That will certainly be in place until August. After that, it will be a matter for a new Government to determine. That is all I can say on that matter.

I had seven minutes, Chairman, so I might add two onto the five, if that is okay.

Okay, yes.

There is one issue I would like to raise with Mr. McKeon. There are employers who have fallen foul of this, including one in my constituency, Tiglin, which is a drug rehabilitation charity. Companies that have changed their accountants during this time period are being refused the wage subsidy scheme. Revenue is telling them that the re-registration now deems their employees to be new employees. It is saying that while it understands that this is not the intended policy, they are now deemed to be new employees. There are companies across the country struggling because they have been completely incorrectly locked out of the wage subsidy scheme from the start because of that. It is very specific. Mr. McKeon does not need to respond if he has nothing to say about it but I ask him to look at it. Revenue has acknowledged it is an issue but has said it has no solution to it. I hope some communication with Mr. McKeon's Department might be able to do something about that.

Mr. John McKeon

Certainly, we will talk to Revenue. I am not aware of the issue and I do not think that was the intention when the scheme was designed. There may be some technical issue but I will talk to the chair of the Revenue Commissioners and see what we can do.

I thank Mr. McKeon. I have not much time left so this is slightly unfair but can I ask Mr. Watt a question? Obviously, in health there are vast direct Covid-19 expenditures, be it testing and tracing, PPE and a variety of other direct Covid expenditure items. There are already a huge number of indirect items so we are losing from 20% up to 60% of the capacity in our public system. That means we will have to find ways of ramping up capacity. Is there a full-year Estimate for this year and a provisional Estimate for next year on the additional spending on healthcare, not to provide any additional services or to do anything extra but just for the indirect and direct Covid-related costs?

Mr. Robert Watt

The allocation this year in terms of health is almost an additional €2 billion, which is Covid-related. We do not have a figure at this stage for what the outturn will be - that is the projected figure - and we do not have a sense of 2021 yet. Those discussions will begin in earnest in September when we start preparing for the Estimates for 2021. We will have to figure out what additional capacity is required and what, of the policy mix that has been in place, will remain in place and be sustained. That is something we will engage with our colleagues in the Department of Health on, but at this stage we do not have a figure. It is likely that there will need to be more capacity for testing and more capacity generally in the health system. The health system was operating close to 100% last winter, which is not were anybody wants to be. Even in the absence of Covid-19, there is an urgent need to ensure there is more capacity so that we can manage peaks within the system. Of course, with Covid-19 and the possibility of a resurgence of cases, we will have to look at our preparedness for that. That will have financial implications, but we do not have figure at this stage.

I want to add my voice to the acknowledgement of the huge volume of work done by so many staff in processing the vast amount of claims we have seen in recent months.

I want to raise a concern I have with regard to seasonal workers, of whom there are a broad range, such as, for instance, people who work for the State Examinations Commission, and we see it in my own area, especially tourism. The reality is that this does not solely affect one or two families but can infect entire communities in our coastal and island regions. For the majority of these seasonal workers, the bulk of the income they receive is during the summer months. Will band qualification methods take into account income loss this summer? Will they look at the average weekly income over all of 2019 or relevant periods? What exact methods will be used to determine the qualification for bands?

Mr. John McKeon

The approach we are using in recalibrating the payment is to examine people's earnings in 2019 and their earnings in January and February of 2020. We will calculate the average weekly earnings for each of those two periods, and whichever is the higher amount will be the basis on which we will determine which band they go into. That is an attempt to try to address any issues of seasonality and so on. For somebody who is self-employed, we will be relying on the 2018 data, and somebody who was not self-employed in 2018 but who was in 2019 will be dealt with on an exceptional basis.

Another anomaly is cross-Border workers. We are aware that people who live in the Twenty-six Counties and work in the Six Counties can claim, but those who live in the Six Counties and work in the Twenty-six Counties cannot. If we are basing payments going forward on tax receipts, why are they being excluded? Did Mr. McKeon provide any recommendations on this?

Mr. John McKeon

As I said previously, the pandemic unemployment payment is a substitute for jobseeker's payment. The standard rules of jobseeker's payments apply, which are that people are resident in the State and were in employment before they made a claim. The rules which also apply to those jobseeker's payments, and indeed any social assistance payment, within what are called frontier workers are set down by the European Union. They were subject for a long number of years to debate which culminated in 2004 with Regulation (EC) No. 883/2004. Under that regulation, the country of residence is the competent state for paying social assistance payments, including jobseeker's payments. That is the rule we are following. If that were to change, we would need to change the regulation, I am afraid. It is also the approach that is being followed in other countries, including the UK, in respect of frontier workers.

Another issue, which I know Mr. McKeon discussed today and I listened to his response to it, is with regard to the over-66s and the fact they have been excluded from this payment. Mr. McKeon made an interesting point both times I have heard him answer this question specifically on the pension rate for two-pension households. I have come across similar situations, and I will explain one particular case to Mr. McKeon. I was contacted by a man who is over 66 and working to pay his mortgage and bills.

His wife is about 59 years of age and is terminally ill with cancer. She cannot work. The loss of that income has had a major impact on the day-to-day lives of those people and there is great concern for their future. Was any consideration given to including people who are working and aged over 66 years in this payment and were any recommendations made?

Mr. John McKeon

The system was designed very quickly, but in designing it we looked at how we would apply it. As I said, we apply this payment in the same way as we apply a standard jobseeker's payment. People older than 66 years who are working and lose their jobs do not normally have access to jobseeker's payments and rely on their pension payments. That is the income support provided and legislated for by the Oireachtas for people over 66 years of age. It is generally a more generous support than jobseeker's payments and easier conditions apply. We have applied the same rules, and I reiterate that if we were to deviate from those rules, that would be a matter for the Government and the Oireachtas because I believe legislation would be required.

It is clear, however, that there are anomalies and I would like to see those addressed. On SUSI payments, has Mr. McKeon spoken to his colleagues in the Department of Education and Skills about taking into consideration the collapse in income in 2020, rather than considering 2019 only?

Mr. John McKeon

I will have to come back to the Deputy on that question, and I will do that. My understanding, however, is that people on the PUP will be eligible for SUSI grants, but I need to confirm it.

I will take five minutes. Picking up on the issue of those aged over 66 years, while I understand the structure and reasons for the approach taken, I am not sure Mr. McKeon's assessment that people on pensions are better off is correct in the context of what was said about relative disadvantage. Many people in that situation were also working to supplement their income, but have now lost that income. From what the Minister said at the time, my understanding was that their income was to be supplemented by one of the range of supplementary welfare allowances or exceptional needs payments and they would not be means tested during this period. Is that the case? I ask that question because I know there have been difficulties regarding this issue and I want to clarify Mr. McKeon's understanding of how this process operates.

Mr. John McKeon

There has been no change to how the supplementary welfare system operates. People with an urgent financial need or an ongoing financial need as a consequence of perhaps losing employment or becoming ill, and who are not eligible for an existing social welfare payment, can claim supplementary welfare allowance. That is the safety net. We will make and have made that available to people aged over 66 as we would normally. In one of my earlier answers, I stated that, so far, some 137 people aged over 66 have applied for and received that payment.

I have several cases in mind where that has not happened or people have been told that the means test is applying. I know there was a circular to that effect. I am bringing the matter to Mr. McKeon's attention to let him know there have been several backlog cases. I have raised it with the Department separately and I can do so again rather than spending more time discussing it now.

There are a few other anomalies which have left people stuck and unable to move. This includes couples who are separating but have been treated as a unit because they have not been able to move to another property or rent somewhere else as a result of Covid-19. It is the difficult cases that create these tensions, but these practical problems exist. They are very much a minority compared with the overwhelming support that has been quickly provided. It is important to point that out, and I thank Mr. McKeon and his Department for doing that.

One case in my area causes me particular concern. It involves a lady who had Covid-19 who had to resign her position, not because of Covid-19 but because she is a single parent and her childcare arrangements are no longer available. Previously, the child went to school and was then taken care of by grandparents and other means. That is no longer possible, however. She has no other means of looking after the child and, as a result, she had to resign her position. How will this woman be treated by the Department in an assessment of eligibility for a Covid-19 payment or jobseeker's allowance?

Mr. John McKeon

Generally speaking, in the normal environment, somebody who voluntarily resigns his or her work to care for another person would not be able to avail of jobseeker's payments. Other income supports are available, however, including carer's allowance, parental benefit, etc., and those payments would be made available.

The Government's approach this time around has generally been to encourage employers to be as flexible as possible with people and to support people with childcare responsibilities through remote working, annual leave arrangements, force majeure leave and so on. Where that does not work, the Department has stepped up and provided access to income supports, as we always would. Normally this would be done through the supplementary welfare allowance scheme. In this case, when people who are unable to go back to work are already on the Covid-19 pandemic unemployment payment, as is generally the case, we have been flexible in allowing them to stay on it. We cannot sustain that in the long or medium term, particularly as childcare arrangements become more regularised and childcare services become available again. In the short term, we have certainly been flexible in our application of the conditionality.

I thank Mr. McKeon. Deputy Cullinane raised a question earlier about the Money Advice & Budgeting Service, MABS, and planning. I had a conversation with MABS and according to the feedback I received, people are aware of the advertising campaign, they are more aware of MABS and they are using the widget, especially late at night when the pressure is particularly on their minds. It is sometimes easier to use that than to pick up a phone. I thank the Department for introducing that. It is very important to plan for the autumn months, when utility bills will become relevant again. It seems to be going well so far.

I do not have much time but I would like to ask Mr. Watt about remote working. Remote working has been essential to the continued operation of the economy during this period and it must continue. Broadband has been a huge part of that. What are the plans within the Department of Public Expenditure and Reform to facilitate remote working? I know that yesterday's programme for Government mentions it. Has additional expenditure been allocated to it?

Mr. Robert Watt

The Civil Service has enabled people to work from home where possible. People in some Departments, such as Mr. McKeon's Department or Revenue, had to go into work. The protocols deal with those people. In the main, however, we have encouraged people who can stay at home and work remotely to do so. We will see if that continues in the future. It can raise a variety of questions about people's preferences and the infrastructure we have in place. It worked very well over the last three months, but there are questions around how long that will last. There are challenges involved in continuing over the next six or 12 months or longer.

I would like to ask Mr. Watt's view on the public debt. He mentioned that it will head towards €250 billion. What is the basis for that statement?

Mr. Robert Watt

The debt outstanding before this crisis was €205 billion. If we have to borrow €25 billion this year, €15 billion next year and a further sum in 2022, that will add another €50 billion in cash terms. That is the broad outline. The deficit could evolve differently over that period and the debt could be lower than that, but that prediction is based on the Department of Finance's April forecasts.

What about the interest rates Mr. Watt cites?

Mr. Robert Watt

The figure of €250 billion is our estimate of the stock of debt we will have by the end of this crisis.

Mr. Watt referred to the possibility of interest rates increasing to 2%, 3% or 4%.

Mr. Robert Watt

Yes.

With Europe supporting these initiatives, does Mr. Watt think rates will remain stable for three years?

Mr. Robert Watt

For the next few years, while the European Central Bank, ECB, is buying up the sovereign debt of Ireland and other states across the eurozone, we will not see a spike in rates. The ECB is effectively a backstop. It has announced that its support programme for sovereigns across Europe has increased from €750 billion to €1.35 trillion. That will keep a lid on rates this year and next year, so we will not see a spike.

My point referred to the outlook in the longer term, when we have to refinance this debt; not in the next two or three years, but in the next five or six years.

Certainly, over the medium to longer term, it is likely that we will have to refinance this debt at rates of interest well above the rates that we have now, and above the average rate of just under 2%. That was the point I was making. The debt is now sustainable and we have to do what we are doing but there is a constraint there. That constraint may not kick in for a period but future generations will have to service this debt and it will cost more to do so.

Has the Department put anything in place to prepare for that, such as having a fund there to deal with this at the time?

Mr. Robert Watt

Those will be issues for the new Government because it will depend on how the economy evolves and decisions it will take. We have done a lot over the past two years and more to get the public finances into shape and to have a surplus for this year, which has been of great benefit as we face this crisis. If we had had a large deficit coming into this crisis, we would be in a much worse position. We also improved the short-term funding position by lowering the level of debt redemptions that were due. Over the past number of years, we had a large amount of debt to redeem. That has taken place so our funding needs over the next few years are lower. A number of decisions have been taken that will put us in a better position than would otherwise have been the case.

How we prepare for debt into the future and manage the interest bill will be matters for the new Government. Ultimately, the level of debt and how it is serviced will depend on the nominal growth rate of the economy relative to the interest rate on the debt. That is related to the fiscal balance.

Has the Department of Public Expenditure and Reform carried out any work to analyse the economy in the context of tax? We are told that we will not have an increase in tax in coming years. We will have a carbon tax. Has the Department already carried out an analysis of that?

Mr. Robert Watt

The Department of Finance carries out analyses of taxes all the time. It has done lots of analyses and we have had an input to various pieces of work. The Department of Finance has done many analyses on carbon tax, the revenue it will generate, the consequences of it and the impact on different prices and so on. All taxes and policy options are analysed in great detail and the Department publishes papers from the tax strategy group every year, setting out its updated analysis of the impact of different taxes.

There are supports in place for the SME sector and Mr. Watt said that further supports may be needed. Has the Department identified areas in which it might want to support the SME sector or where support is required?

Mr. Robert Watt

This is an issue that we will take up with the new Government whenever it is in place. We will discuss that. We have our own thoughts and are working on what the options could be. Now that companies and sectors are going back to work, we have an idea of the types of challenges we face. There are companies that will have to go back to work with lower revenues and higher cost bases. They will be in a difficult position. There are companies for which revenue might recover quickly but they will be left with a large overhang of debt because they have not been able to pay their rent or the cost of their lease for a period. There are different types of challenges that the sectors will face. The SME sector does not have an appetite for debt and, therefore, does not want to take it on board, In many cases, SMEs are not in a position to service more debt but still have financing needs. We are looking at a range of options and we will have those conversations with the new Government.

Clearly, a lot has been done and we have discussed the size of the deficit, the spending measures and the increase of the debt. There is a lot to be done but I am sure the new Government will be committed to doing more.

Is there a need to focus, for example, on the retail sector? Mr. Watt was earlier asked about the tourism sector. Those sectors are particularly weak at this time and will require substantial support not just this year but also next year. Has the Department worked out plans in that area where microbusinesses, in particular, will be sectioned out from the SME sector in general, and will there be specific and targeted supports for them?

Mr. Robert Watt

That is a challenge.

The supports that we have put in place, such as the wage subsidy scheme, the restart grant, and the warehousing of debts, have applied across the board to companies in any sector of the economy. We have done some very small, once-off or bespoke measures for particular sectors. There is extra support for the childcare and the beef sectors and I believe that money for the arts was announced today. Generally, the approach has been to provide a wage subsidy scheme and restart grant based on a common criterion that applied to all sectors. When we see the economy getting back to work and when we know that retail, hospitality and certain sectors will be more badly affected, it may make more sense then to have more targeted interventions for those sectors. We are working on what those options might be along with our colleagues in the Departments of Business, Enterprise and Innovation and Transport, Tourism and Sport.

This is about figuring out exactly what the challenge is and how to construct and operationalise a scheme that can work. One of the things we have learned over the past three months is that it is okay to aspire to the pandemic payment, the wage subsidy scheme and the restart grant, but one needs to be able to back it up with the ability to identify firms or individuals who need support and then get money to them quickly. We need to figure out what the needs might be and the mechanism, the criteria, the approach, and then find a way then to get money into firms. We are looking to-----

I thank the Deputy.

If Mr. Watt is looking for a project to ring-fence, perhaps he might look at Kilkenny which he is familiar with from a tourism point of view and all of the support we will need down there.

Mr. Robert Watt

I am sure there are plenty of needs in Kilkenny.

I thank our guests again and all of the staff in the Department for their work over the past number of months.

This question will require a brief answer. I hope he is aware of a situation that I brought to the attention of the Minister through correspondence and parliamentary questions where there are a number, which I hope is small, of employers who have reduced the working time of their staff from five or four to three or two days a week and have then forced their staff to take the remaining days as annual leave. Many are now in a situation where their entire annual leave has been used up. That will create difficulties for them during the summer months in respect of childcare and other issues. It is an absolutely deplorable practice on the part of employers. When I have raised this with the Department, it has indicated that the employer is within its legal rights to do this. This is probably not best practice but it is legal. Does Mr. Watt believe that legislation needs to be amended in that regard? This is a "Yes" or "No" question.

Mr. Robert Watt

I am not aware of the correspondence the Deputy has had with the Minister but I have heard media reports of people being forced to take leave or arrangements being entered into between employers and employees on how they can manage the period ahead, sustaining and trying to support people’s income while the demand for their services is lower. I am not sure of the legal position. If the Deputy says-----

I will get this information for Mr. Watt. Essentially, the response I have received is that this is legal and a direction for the staff in question to go to the Workplace Relations Commission, which is clearly is not optimal. It would be better if legislation was on the side of these workers.

On the wage subsidy scheme, does Mr. Watt have a view as to whether this should be extended to the end of the year?

Mr. Robert Watt

No, I do not. The new Government will decide. The subsidy has been extended to August. The new Government will decide during the summer months what we do after that. This will depend on how quickly people get back to work, the extent to which the economy restarts, and the numbers of people still on the scheme and receiving the pandemic payment.

This has been one of the most important schemes during this pandemic and has allowed businesses to remain afloat. I hope that it will be extended, particularly for those businesses that will not otherwise survive and who need that support to retain their workforce. Nobody likes pointing to anomalies but when it came to the pandemic payment, there was a situation where people pointed to the anomalies and almost tried to pit one recipient of the payment against another. Is it true that some companies have remained profitable throughout this period and are still in the wage subsidy scheme?

Mr. Robert Watt

The eligibility criteria for the wage subsidy scheme set out that a company has to demonstrate a 25% fall in revenue. If a company meets that criterion and if people are still on the books who were there over the period of January to February, the company can get 85% of its January to February pay. So it depends on-----

Would Mr. Watt consider it ironic if companies which remained profitable and were drawing down the wage subsidy scheme were among those pointing the finger at the anomalies with the pandemic unemployment payment? Does he think it would be unfair and ironic for an employer who is drawing down the wage subsidy scheme to be pointing the finger at staff representatives who are in receipt of the pandemic unemployment payment? Does he think that would be unfair or at least ironic on their part?

Mr. Robert Watt

I am not sure that I understand the Deputy's question. Is he saying that employers who are claiming, on behalf of their employees, the wage subsidy scheme-----

I am referring to those employers who are doing so with some employees who are being kept on, and then pointing to others who perhaps were on a lower wage and are actually better off on the pandemic payment.

Mr. Robert Watt

If they are saying that the pandemic unemployment payment should be reduced because some people are better off, irony might be one way of putting it.

It might be suggested that if those companies are pointing their finger at some of their staff and suggesting they won the lotto, the corollary regarding the wage subsidy scheme is that they have won the EuroMillions.

If there comes a point where an incoming Government decides it needs to restrict the wage subsidy scheme, would Mr. Watt agree that it would be more appropriate to direct it at those sectors and businesses that need it most, as opposed to it being abolished altogether?

Mr. Robert Watt

The wage subsidy scheme was devised over a very short period of time in response to this crisis. The Minister for Employment Affairs and Social Protection, Regina Doherty, has made a number of significant changes over the last few months as we have seen how the scheme has evolved and its impact. Mr. McKeon has mentioned those changes already. The Minister and the Government have announced the extension of the scheme to August. I think it was originally due to end on 10 or 12 June, so it has gone beyond its original date.

There are many issues around policy and how we support companies towards the end of the summer months. There are many difficult challenges. It is very hard to know exactly what supports to put in place. The approach has been to provide economy-wide supports. That makes it simpler and easier for the Revenue Commissioners to administer. All of these things have to be guided by the ability of Revenue to administer these schemes. If one focuses on particular sectors and says that only certain sectors will benefit beyond a certain date, of course there will be companies in other sectors that feel they also need continuing support and are being unfairly excluded. One could make the argument that because some sectors are not as badly affected as others, support should be targeted. The approach to targeting we have adopted has been the 25% reduction in revenue. There are many options one could take in changing that criterion. We will turn our attention to the various options with the new Government and try to come up with a view.

I agree with the Deputy that the impact of the wage subsidy scheme has been absolutely critical. Without the scheme we would probably have had another 400,000 to 500,000 people on the pandemic unemployment payment. They would not have a link to their employer and they would not have their pay being topped up by their employer - over 80% of employees are receiving some type of top-up, which is great - so the scheme has been very effective. As to how it continues and in what form, the Government has made a commitment until the end of August and we will see after that.

I thank Mr. Watt. I call Deputy O'Dowd, and thank him for his patience.

I had to do an interview with Raidió na Gaeltachta, so I apologise if I have missed some of the answers. If I am repeating a question it is because I was not actually here.

On the matter of the backlog of money that is due to people waiting to get their payments, is there a timeline as to when that may happen? If I heard correctly when I was here, the Department of Employment Affairs and Social Protection is addressing it. Everybody respects and acknowledges the fantastic work it is doing and the way it has turned hundreds of thousands of applications around. However, the issue still affects a number of people. That is my first question.

My second question relates to people who are getting older but are still at work. Those aged under 66 years who were working when this happened will receive the pandemic payment until their 66th birthday. If their employment continues thereafter, they will receive a payment under the temporary wage subsidy scheme and, if not, they will receive the pension payment to which they would have been entitled or a social welfare assessment of the means of the household will be done? Is that a fair summary of the position?

Mr. John McKeon

On the backlog, a number of people are due arrears because we were late getting their payment commenced. We believe that number is relatively small. As I explained earlier, many people think they are due arrears but because the payment is made one week in arrears, they will find when they return to work that they receive a payment in their first week in work. We cannot sort this out easily. We must examine about 730,000 claims and about 688,000 individual payments made to people. That is a very big job and our current focus is on making the 500,000 payments we make weekly under the pandemic unemployment payment and the roughly 1.5 million other payments we make under other schemes. We are setting up an IT process to help us get through the challenge of reviewing all the claims. We expect that will be up and running in the next couple of months and we will be able to start making the payment of arrears that are due in the third quarter. At that stage, I suspect many people will have found that they received payment for an extra week at the end of the payment period, which will resolve the issue.

I have dealt with pensions in response to other Deputies' questions. The position is relatively straightforward, although it seems anomalous to some people. The pandemic unemployment payment is a substitute for the normal jobseeker's payment, which is for those aged between 18 and 66 years. The State, and the Oireachtas, have provided for a standard age-related payment, the State pension, for those over 66 years. In the normal course, this is a better payment made on better terms than the jobseeker's payment. That is the position that applies to people aged over 66 years. I am aware that some people feel they are being disadvantaged because the payment of the pandemic unemployment payment is based on a two-person household. An individual gets a higher basic rate under the pandemic unemployment payment but a two-person household still gets €350 under that payment. Most people in receipt of the State pension are getting €470 for a two-person household so they are still better off. However, people are comparing the €350 basic rate with the €240 basic rate and forgetting about the second payment. In most cases, the pension is still a better outcome.

That is not true in every case. Many people aged 66 years or over who are still working do not have anyone living with them. They would receive the pandemic unemployment payment were it not for their age. They believe that is age discrimination. Different people have different views but given that the pension age is under consideration, it seems very unfair that some people, even if it is a small number, are being discriminated against solely on age grounds. One of my constituents is a sole trader who has one person employed temporarily with him. The temporary employee is getting much more money than the sole trader is because the latter is aged over 66 years. He has a very small pension entitlement and lives on his own. He has various other problems and he feels discriminated against. Mr. McKeon stated that legislation may be required. Would it be possible to change the regulations to provide that community welfare officers or social welfare officers may review the cases of people in this exceptional category and increase their incomes to €350? No one would be due a bonanza but this would show respect to those affected and their incomes would not exceed those of anyone else on the pandemic unemployment payment.

Mr. John McKeon

That is something that could be examined.

I think in the first instance the Government would have to make a decision effectively to increase the rate of pension pay, which would be an enormous decision, because it would be very difficult to say to a pensioner who was not working that a pensioner is getting €350 because he or she happened to work in January or February, but as the first pensioner was not so-----

Time is very short.

Mr. John McKeon

It is a bigger decision than Deputy O'Dowd might imagine.

That is not a fair comment.

Mr. John McKeon

It might only be a small number of people but it would very quickly extend to 600,000 people.

I do not think so. The point I wish to make again is that it would and should only continue for the duration of the pandemic unemployment payment and the income could not exceed €350. All of the other issues pale into insignificance in the face of the charge of age discrimination, which in my view is not acceptable.

I will ask both Mr. McKeon and Mr. Watt a couple of questions. First, I join my colleagues in thanking Mr. McKeon and all the staff of his Department for the work that has been done in recent months in making sure that people receive payments and in processing applications. At the start of this year there was a plan to separate the front office and back office functions in the mid-west and to consolidate the back office in one particular location. I do not know what medical advice Mr. McKeon is receiving in light of Covid-19, but I suspect there would be a reluctance to consolidate all back office functions in one location in the mid-west. Will Mr. McKeon outline where that plan is at currently?

Mr. John McKeon

Certainly. To explain the concept of front office and back office, in the traditional model, which dates back quite a long time, all claims for jobseeker and one-parent family payments were taken in a particular office which had a catchment area, and they were dealt with and maintained in that office and never moved out it. That was relevant at a time when we made cash payments over the counter and it continued for a long time thereafter. However, with modern digital technology the work can be allocated anywhere once the claim is received. It is more efficient to spread the workload and to allocate it to locations based on availability of staff rather than to have it all concentrated in one area for one catchment area. That is what the front office and back office is about.

We were never going to have just one back office. There were going to be a number of back offices and that would still be our plan. Obviously, we are going to take the learnings from the Covid experience and the fact that a lot of staff are able to process claims from home, so perhaps we will move on beyond that plan, but that is something we will need to discuss with the staff representative organisations in the first instance.

I thank Mr. McKeon very much. Mr. Watt mentioned value for money in the context of testing at a cost of €100 to €200. When Dr. Cillian De Gascun was before the committee he seemed to think that the cost of testing in the national laboratory was €60. I appreciate that there is a finite capacity in that laboratory. Was value for money obtained or was it even possible at the time to look at value for money? Was it a matter of just needing to get the capacity in place regardless of what it cost?

Mr. Robert Watt

I am not sure about the exact cost. I think the costs differ depending on whether they go to the laboratories here in Ireland or to the laboratory in Germany. Clearly, it was absolutely essential to get testing capacity in place. That was the imperative and the decision was taken that we had to do that, whatever the cost.

Does Mr. Watt know if we are still paying for tests because of the arrangements that possibly had to be entered into? Nobody could second-guess what was going to be required at the time. Are we still paying for a testing capacity that is not being utilised?

Mr. Robert Watt

I think some of the costs are fixed costs that we are incurring anyway, and there is an element of costs that are variable costs. We can come back to you, Chairman, on the breakdown. I think it depends on which option we are pursuing, but I do not think all of the costs are per test. I think we incur some costs to have access to capacity as needed. We can come back to you on the details of that.

It is late in the evening and I do not want to detain the witnesses any longer than necessary, but is it possible for Mr. Watt to share with the committee the correspondence between his Department and the Department of Health or the Department of Health and the HSE with regard to testing?

Mr. Robert Watt

I am sure we can, Chair. I am sure we can have a look and see what the correspondence was.

Thank you. Is Mr. Watt happy that, as we move forward, we are now getting value for money on testing? Contracts were entered into at some point and I presume they are finite in length.

Mr. Robert Watt

I understand there is now a review of what is required and the Government will be asked to decide on what the policy is, into the future, on testing. There are issues around the number of tests, the criteria for tests, the capacity and the cost. A review is being undertaken of what is required and the Government will make decisions on that.

I thank Mr. Watt for agreeing to provide the correspondence. We are approaching two hours so I thank the witnesses for coming in and answering all of our questions. I also thank the staff who were here today.

Is it agreed to request the Clerk to seek any follow-up information and carry out any agreed actions arising from the meeting today? Agreed.

The committee adjourned at 6.30 p.m. until 11 a.m. on Thursday, 18 June 2020.