Dáil Éireann Debate, Wednesday - 6 May 2015
1. Deputy Seán Ó Fearghaíl asked the Tánaiste and Minister for Social Protection her plans to provide the self-employed with greater access to social welfare benefits; and if she will make a statement on the matter. [17372/15]
View answerI have the unenviable task of standing in for the inimitable Deputy O'Dea. This question seeks to explore with the Tánaiste what plans, if any, she has to extend access to social welfare benefits to the self-employed. The question is posed against the background of all of us in this House wishing to see the indigenous sector develop. We see access to welfare benefits as part of that necessary change.
Self-employed people pay PRSI at the class S rate of 4%. This entitles them to benefits such as a State contributory pension and contributory widow's, widower's or surviving civil partner's pension, contributory guardian's payment, maternity benefit and adoptive benefit. A combined PRSI rate of 14.75% is paid in respect of employees, who can access the full range of social insurance benefits. This comprises 4% PRSI payable by employees and 10.75% by their employer, or there is an 8.5% employer PRSI rate for weekly earnings under €356.
The most recent actuarial review of the Social Insurance Fund, published in 2012, stated that the self-employed are obtaining better value for the level of their current social insurance contributions than employees. The review found that a 15% contribution rate would be needed to provide the core full-rate State contributory pension to the self-employed. This compares very favourably with the 4% rate currently paid by the self-employed. In addition, self-employed people with insufficient means can access social assistance payments such as jobseeker's allowance and disability allowance, subject to satisfying the qualifying means criteria.
In June 2011, I established the advisory group on tax and social welfare to examine a number of specific issues including the issues involved in providing social insurance cover for the self-employed. It reported back that during the three year period from 2009 to 20011 nine out of every ten self-employed people who claimed jobseeker’s allowance received payment. Therefore, it was not convinced that there was a need for the extension of social insurance for the self-employed to provide cover for jobseeker’s benefit. However, the group found that extending social insurance for the self-employed was warranted in cases related to long-term sickness or injuries, through the invalidity pension and the partial capacity benefit schemes. In this regard, the group recommended that the rate of contribution for class S should be increased by at least 1.5 percentage points, payable on a compulsory basis only.
At the time, some employers’ groups called for the provision of social insurance benefits to the self-employed on an optional basis. This was addressed by the advisory group which considered that allowing people a facility to opt in or opt out at their own discretion could lead to the selection of bad risks. The whole principle of social insurance is social solidarity where everybody pays in and, if necessary, cover is available. Allowing people to opt in or opt out could result in a negation of the social solidarity contributory principles which underline the system. Any changes in the PRSI system for the self-employed would have to be considered in a budgetary context and, in particular, the funding position of additional entitlements. There are very valuable additional entitlements offered in the advisory group report which I accept, but the issue for self-employed people, or for their organisations, was that it would involve an additional contribution which they did not seem inclined to favour at the time.
Any of us responding to this issue accepts that for the system to work a realistic contribution has to be made. As we look to the future and to the sort of economy we want to develop, we find we are all committed to developing indigenous small and medium sized enterprises. We all accept that in order to do that successfully the safety net of a social welfare benefit system does two things, that is, secures a measure of social justice, to which the Tánaiste has alluded, but it also goes a little bit further in that it helps to reduce the level of risk that entrepreneurs are taking. We need people to take risks and we need to incentivise them to do so. Notwithstanding the advice the Tánaiste has received from the advisory group which she will take on board, if there are changes to be made I accept they would need to be made in a budgetary context. Does the Tánaiste envisage changes being made in the near future?
I favour the report of the advisory committee. We have spoken in recent times of social dialogue in regard to the relationships between the Government and different groups. As the Deputy and I are aware, the numbers of people involved in self-employment, contracting and sub-contracting work and setting up their own companies, in particular younger people, has been on the increase for well over ten years as we move to a more entrepreneurial style model for many local Irish businesses. Therefore, the prospect of self-employed people getting cover for invalidity and partial capacity benefit for an extra 1.5 percentage points would be very good value. As has happened in other jurisdictions where benefits have been extended, that could be brought in over a period of time so as not to excessively impact in one year. However, it would mean that self-employed people and the organisations representing them would have to examine this.
The regrettable part is that self-employed people or business owners whose businesses are very profitable can pay for private income continuance plans, while those who are just starting out or who are just about keeping their heads above water cannot. The offer from the social insurance system is actually very valuable, a point that has been made by a number of Deputies from all sides of the House. Now that the economy is in recovery, I would welcome consideration of this by self-employed people and their representatives. If implemented, it would add very significantly to the cover available to self-employed people. At present, if somebody suffers a very serious illness, he or she is entitled to disability or invalidity payments on a means-tested basis. If the person pays an insurance contribution, there will be some cover. I welcome the Deputy's comments on the necessity of funding the contributions appropriately.
In alluding to the means test, does the Tánaiste accept that, even as things are, there needs to be a communications campaign to make people's entitlements clear? Often, people do not distinguish between jobseeker's benefit and jobseeker's allowance. For some time, the Fianna Fáil position has been that we would favour the introduction on a voluntary basis of a phased scheme whereby jobseeker's benefit and illness benefit would be payable to the self-employed. We see that as part of our commitment to developing an entrepreneurial culture. The idea that the self-employed could opt into such a scheme seems to us to be practical, although the Tánaiste is suggesting that an opt-in would not be a positive.
I am going on the advice of the advisory group, which researched the matter very deeply, and also on the actuarial reviews which show that, for the 4% contribution that self-employed people currently make, they get widow's and widower's pensions, contributory retirement benefits, maternity benefit and guardian's benefit. Those are significant benefits for 4%. Many self-employed people are relatively young - for example, in the area of contracting in IT. For this reason, perhaps we should do a further campaign. I would certainly be prepared to look at that.
As regards opting in, all the studies say there has to be a contribution on a social solidarity basis, given the risk the social insurance fund and taxpayers have to cover. If it is only on an opt-in basis, instead of getting the general population, we will tend, for obvious reasons, to get the more risky element of the self-employed population, which would mean it would be very difficult to fund. Bearing in mind where we have come from in terms of our financial difficulties, and even before we had difficulties, the principle of social insurance and social solidarity has always been that people pay in and the general population are entitled to claim.
In case any self-employed people are listening, I must point out that after I became Minister for Social Protection we changed the basis of assessment significantly. Previously, people had to go to great lengths to get extensive information about their tax affairs and the performance of their businesses in earlier years, precisely when they might have been doing well. Now, for the self-employed, farmers or fisherman, if there is a catastrophic loss of income, they can go to the local Intreo office and present the information on what has happened to cause the catastrophic loss of income, and we will take it on a current basis and examine the information. This has helped many people, particularly those formerly employed in construction.
