I move:
"That the Bill be now read a Second Time".
This Bill is designed to implement two decisions which were made by the Government in the context of the Government plan Building on Reality 1985-1987. The first relates to the introduction of the new social employment scheme for the long term unemployed and the second decision concerns the abolition of the intermittent unemployment insurance scheme known as the wet-time scheme. The Bill is a fairly straightforward one but I trust that Deputies will have found the Explanatory Memorandum circulated with the Bill helpful in their examination of the various measures being proposed.
In regard to the social employment scheme, this major new initiative will be brought into operation over the coming months by my colleague, the Minister for Labour, who will be giving an outline of the scheme in the House tomorrow. For that reason I do not propose to go into any great detail on the scheme except to refer to the aspects of the scheme which are relevant to the proposals in this Bill.
Under the new social employment scheme persons who have been unemployed for at least a year and who are drawing unemployment assistance will be offered part time work for two and a half days a week. The work will last for up to 52 weeks for each person and the £70 wages under the scheme will be paid in lieu of the unemployment assistance that would normally be paid in respect of a full week. Accordingly the savings on unemployment assistance will partially offset the cost of wages, supervision, materials and general overheads. The wages under the scheme, like wages under any other employment, will be liable for income tax, where appropriate, and for PRSI deductions.
This Bill will facilitate the introduction of the new scheme by providing for the exclusion of participants in the scheme from unemployment assistance and unemployment benefit and by setting out the PRSI arrangement for the workers concerned.
Sections 3 and 9 of the Bill deal with the PRSI arrangements for employees under the social employment scheme. The effect of section 9 is to classify employment under the new scheme as an "excepted employment" for the purpose of the Social Welfare (Consolidation) Act, 1981. This excludes the employment from normal social insurance cover. However, section 3 of the Bill provides that the employment will be insurable for occupational injuries purposes. This is the type of insurance cover that already applies to employment under schemes promoted by AnCO and the Youth Employment Agency. The intention is that the social insurance position of social employment or training schemes should be broadly similar.
As employment under the new scheme will be insurable for occupational injuries benefits only, the Class J rate of employment contribution will apply instead of the normal PRSI contribution. The Class J rate normally amounts to 3.4 per cent 0.4 per cent for the employer and 3 per cent for the employee. The 3 per cent comprises the 1 per cent health contribution, 1 per cent youth employment contribution and the 1 per cent income levy. However, where the employee has a medical card — and it can be assumed that many participants in the social employment scheme would be holders of medical cards — the full 3.4 per cent contribution is paid by the employer.
It will, of course, be open to persons employed under the social employment scheme to engage in other employment for the remainder of the week. Depending on the hours worked and other factors, that employment could be fully insurable and this will enable the person concerned to maintain his existing insurance record and the possibility to requalify for unemployment benefit. However, where a person does not succeed in getting insurable employment for the remainder of the week his social insurance record will be fully protected through the award of special credit contributions. These credits will substitute for the credits normally awarded when a person draws unemployment benefit or assistance and I will be making regulations for this purpose on the same lines as those already in force in respect of AnCO and youth employment trainees. Accordingly, workers in the new scheme can be assured that their social insurance records will be fully protected.
The other side of the coin is that participants in the social employment scheme will not be eligible to receive unemployment payments for the balance of each week that they participate in the scheme. To allow participants to receive unemployment payments while employed under the scheme would undermine the whole rationale of the scheme. Sections 2 and 4 of the Bill provide that they will be disqualified for receiving unemployment benefit and unemployment assistance respectively. As I have stated already, the scheme is being funded on the basis that participants will not be eligible to draw unemployment assistance — hence the provision in section 2 of the Bill. Participants will also be disqualified for receiving unemployment benefit through section 4 of the Bill — this is necessary because some participants could by virtue of getting fully insurable employment for the balance of the week succeed in qualifying or requalifying for unemployment benefit.
The new social employment scheme will I believe offer new hope to the long term unemployed and I am glad to bring forward measures in this Bill to facilitate its early introduction. The new scheme compliments the special efforts which have already been made by this Government to improve the social welfare incomes of the long-term unemployed. Deputies will be aware that this group have received special increases in their rates of payment over the last two years. These were the 5 per cent increase granted in October 1983 and a further 1 per cent above the level of general increases in payments in July last.
I now turn to the winding up of the wet-time scheme which is dealt with in sections 5 to 8 of the Bill. Before looking at the individual sections of the Bill, I would like to give the House a general outline of the scheme and the background to the Government's decision to abolish the scheme from the beginning of the new year.
The scheme was introduced in the Insurance (Intermittent Unemployment) Act, 1942, and is now incorporated in Part V of the Social Welfare (Consolidation) Act, 1981. It provided insurance against loss of wages due to inclement weather for manual workers in the building trade. Prior to that, those who were normally paid by the hour, received no compensation for loss of earnings due to recurrent short periods of interruption of work due to bad weather and a great deal of hardship ensued. In 1955 the scheme was extended to include manual workers in the civil engineering and painting trades.
Under the scheme workers are compensated for the earnings lost in periods of inclement weather, up to a maximum of eight hours per day. The wet-time benefit is paid by the employer and is repaid to him by the Department of Social Welfare out of the Wet-Time Fund. To qualify for benefit, a worker must have 12 contributions paid between the beginning of the previous contribution year and the date of the stoppage of work.
The hourly rates of wet-time benefit payable since 27 May 1978 are as follows:— skilled worker £0.87; unskilled worker, £0.79 and young person £0.32.
The total cost of benefit payments is borne by the contributions of employers and employees which are paid into the wet-time fund. The costs of administration, however, are borne by the Department of Social Welfare. There is a separate weekly wet-time contribution distinct from the PRSI contribution and payable in equal shares by workers and employers in the industries concerned by means of stamps affixed to or impressed on wet-time books which are issued at employment exchanges.
Contribution rates have been adjusted periodically over the years to ensure that the fund is adequate to discharge its liabilities. The current contribution rates are:
Employer |
Employee |
Total |
|
Skilled worker |
£0.71 |
£0.71 |
£1.42 |
Unskilled worker |
£0.69 |
£0.69 |
£1.38 |
Young Person |
£0.26 |
£0.26 |
£0.52 |
The original objective of the wet-time scheme was to compensate workers in the building trade for loss of wages due to unemployment caused by bad weather. This was certainly a valid objective at a time when no other form of compensation for such a loss existed. However, improvements in the conditions of employment of the workers concerned have meant that there is no longer any loss of wages because of unfavourable weather.
Under an agreement dated 1 June 1966, which was registered under section 28 of the Industrial Relations Act, 1946, with the Labour Court, the Construction Industry Federation and Trade Unions agreed that the working week would be 40 hours. The agreement also provided that a worker who kept himself available for work throughout the normal working hours of each working day of the week but who had been prevented from working due to inclement weather during any part of that week was entitled to payment of not less than 32 times the hourly rate applicable to him. This became known as the guaranteed week.
At that time I was very much involved in the negotiations on that question. A great deal of work was done by the construction industry workers and the trade union officials, notably by colleagues, such as the late Leo Crawford, who were instrumental in ensuring the implementation of the scheme.
By a further agreement which became effective from 1 November 1980 the guaranteed week is now 40 hours. A worker in this industry, therefore, is paid for a full 40 hours regardless of any time lost because of any weather and the consequent loss of wages which is part of the definition of "intermittent unemployment" no longer applies. The existence of the guaranteed working week in the building industry is the main reason for the Government's decision to abolish the scheme.
In practice what happens at present is that where a stoppage of work occurs due to bad weather, the employer pays the full wage in respect of the guaranteed 40 hours and subsequently recovers from the wet-time fund the amount of any wet-time benefit due. In effect, therefore, the wet-time benefit partially subsidises employers in implementing the 40 hour week to the extent that it is 50 per cent financed by the employees. This subsidy costs employees over £0.5 million a year.
Another factor in the decision to abolish the scheme was that the administration of the scheme in recent years has given rise to a great deal of difficulty and my Department meet with a great deal of reluctance on the part of both employers and workers to comply with the provisions of the scheme. This adds considerably to the administration costs of the scheme. Abolition of the scheme will relieve the Exchequer of the cost of the staff of the wet-time section in my Department. In addition there are costs with regard to social welfare officers, employment exchange and accounts branch personnel, post office charges, etc., which are not precisely quantifiable. The termination of a scheme which no longer fulfils an effective role is all the more important in present circumstances when a central objective of Government policy is to reduce public expenditure.
A further consideration in the Government's decision to abolish the scheme is that the fund from which benefit is paid was intended to be self-sufficient. There is no provision for any Exchequer subsidy to meet a deficiency in the fund. The only assistance which can be provided by the State in such an event is to lend the necessary moneys to the fund and these must be repaid with interest. It is now apparent that the fund will not continue to remain solvent beyond the end of the year. To maintain solvency it would be necessary to increase the contribution rates substantially — by about 30 per cent — even to maintain present benefit rates.
Benefit rates were normally maintained at approximately 60 per cent of hourly wage rates in order that a worker affected by stoppages due to bad weather would not suffer any significant reduction in his take-home pay. However, these rates have not been increased since May 1978 with the result that they are now equal to only about 30 per cent of wage rates. To bring the rates of benefit into line with wage rates would require further significant increases in contributions and I do not imagine that the workers would be willing to pay their share of the increased contribution rates with no benefit to themselves. This is another argument in favour of winding up the scheme at this stage.
I will now briefly refer to the individual sections of the Bill which give effect to the Government's decision to abolish the scheme. Section 5 substitutes a new definition of "intermittent unemployment" the effect of which is that payments of wet-time benefit will not be made for any periods of work stoppage occurring after 6 January 1985. Section 6 provides that contributions under the scheme will cease to be payable after 6 January 1985. This coincides with the end of the contribution year under the scheme. Section 7 provides that applications from employers for repayments of wet-time benefit may be made to my Department up to 29 March 1985. This should give employers ample time to submit any outstanding claims.
It is likely that there will be insufficient assets in the wet-time fund in 1985 to meet the cost of outstanding claims and section 8 of the Bill provides that any deficit will be met through an Exchequer grant to the fund. It is estimated that the short-fall could be of the order of £0.5 million and provision for this sum has been made by Government decision in my Department's Estimate for 1985.
In present day circumstances it is particularly important to identify the priorities among our social objectives and indeed to question whether some of the original objectives are still entirely valid. The introduction of the new social employment scheme, which is facilitated by this Bill indicates the priority which the Government attach to relieving the appalling plight of the tens of thousands of long-term unemployed. Likewise the abolition of the wet-time scheme is evidence of the Government's resolve to eradicate unnecessary and wasteful public expenditure at present so that resources can be freed to help the most needy sectors of our community.
Accordingly I commend this Bill to the House for favourable consideration. I am hopeful it will have a relatively speedy passage.
I want to apologise to my Opposition colleague for the haste with which the Bill was introduced. I have had difficulty with a good deal of social welfare legislation in the past two or three months, in having a Bill drafted and cleared by Government. At present there is a substantial log jam of a very large volume of legislation, including an exceptionally large volume in my Department, both in regard to social welfare and health. I want to thank Deputy McCarthy for having agreed to receive the Bill on Monday last which I know placed him in considerable difficulty in regard to his response at this stage.