I move: "That the Bill be now read a Second Time."
At the outset I wish to join other Deputies in expressing my good wishes to the Minister of State at the Department of the Marine, Deputy Gerry O'Sullivan. He is a very pleasant person — probably one of the most pleasant Members of the House — and I wish him good health.
The main purpose of the Social Welfare (No. 2) Bill, 1993 is to provide a special scheme of social insurance for share fishermen. This is an area of particular interest to many Deputies and I am pleased to bring forward legislation which will address the special difficulties faced by share fishermen. In keeping with our approach of using gender neutral language whenever possible, share fishermen are referred to in the Bill as people engaged in share fishing. The Bill also provides for regulatory powers under which specified employers and contractors may be required to keep a register of employees and subcontractors engaged by them.
In the past, share fishermen were regarded as employees for social insurance purposes and as such were insured for the full range of social insurance benefits. Their insurability status changed however following certain court decisions. Arising from a case brought by the Director of Public Prosecutions and the Collector-General in 1986, known as the McLoughlin case, the High Court held that the skipper of a particular fishing vessel and his crew should not be regarded as employer and employees for PAYE purposes. While this decision did not directly affect the insurability status of share fishermen, it did necessitate an amendment to the regulations regarding the collection of PRSI contributions from share fishermen. They were no longer covered by the PAYE system. The new social welfare provisions introduced in 1988 deemed the owner, bailee or lessee, as appropriate, to be the "employer" of the "crew" for PRSI purposes. It was in this way that the Minister for Social Welfare at the time tried to keep the people engaged in share fishing within the system so that they would be eligible for the benefits which they obviously needed.
The social welfare provisions were subsequently challenged in 1992 in the Griffiths case. Arising from this, the High Court found the regulations to be ultra vires and held that a person could only be deemed to be an employer where an employer/employee relationship existed. As a consequence of this decision, share fishermen could no longer be regarded as employees for social insurance purposes in the absence of a contract of service. They then became insured as self-employed people and as such are covered for widow's and orphan's and old age contributory pensions. They no longer have cover for unemployment or illness.
Following on the decision of the High Court, I met with representatives of the Irish Fisherman's Organisation, IFO, and the Killybegs Fisherman's Organisation, KFO, to discuss their concerns regarding the absence of cover for short term benefits. Share fishermen are in a unique position in so far as social insurance is concerned. Prior to the court decision in 1992, they were always insured as employees and thereby entitled to the full range of social insurance payments. Through no fault of their own, and without any changes in the way in which their work is organised, they ceased to be so insured. The harsh nature of Irish weather conditions for fishing and local tie up arrangements and quotas leave share fishermen open to enforced periods of unemployment at certain times of the year. The difficult conditions under which they work also expose them to increased risks of illness. In this Bill, I am proposing to provide share fishermen with this vital cover.
Part 2 of the Bill provides for the new scheme. People whose principal means of livelhood is derived from share fishing will have the option of paying additional special contributions if they have income of at least £2,500 per year. Share fishermen who opt into the new scheme will pay special contributions. These contributions will amount to 5 per cent of their income in the previous income tax year. Contributions will be payable up to the PRSI earnings ceiling currently set at £20,000 per year. A minimum annual contribution of £250 will apply. For these contributions, share fishermen will get disability benefit for up to 12 months in any continuous period of illness and unemployment benefit for up to 13 weeks in any one year.
The new optional contributions will be payable from the income tax year commencing 6 April 1994. Those who opt into the new scheme will become entitled to benefit form January 1996. The contributions payable will be collected directly by my Department.
This special scheme of social insurance for share fishermen is an important development in the provision of comprehensive social insurance cover. There are about 2,000 people engaged in share fishing. The new scheme will allow them opt for social insurance protection for themselves and their families during periods of illness and unemployment.
Section 11 provides for regulatory powers under which specified employers and contractors may be required to keep, at a specified place, a register of all employees and subcontractors engaged by them. These records will be available for inspection by social welfare inspectors. This measure will strengthen further my Department's hand in combating fraud and abuse.
The question of fraud and abuse in social welfare has been the subject of recent media attention. I want to emphasise that the vast majority of social welfare recipients are genuinely entitled to the payments which they receive. I would like to take this opportunity to outline for Deputies the wide variety of measures aimed at combating fraud and abuse currently being pursued by my Department.
We allocate significant resources each year to the social welfare area, £3.7 billion in the current year. These resources must be managed effectively in the taxpayers' interest. I have taken, and will continue to take, a serious view of people who defraud or abuse the system, whether they are claiming payments to which they are not entitled or whether they fail to pay PRSI contributions which they are required to pay. The measures which I have introduced over the past nember of years, and particularly since 1991, are very effective.
The detection of fraud and abuse is an integral part of the work of my Department. All officers involved in the processing and payment of social welfare entitlements have a function which involves the prevention and detection of abuse of the schemes and the elimination of fraud. Some 13 per cent of the staff of the Department or 530 officers are now involved specifically on combating fraud, abuse and unwarranted claiming. This staff investment is more than justified.
Prior to 1991 approximately 2,500 to 3,000 employer inspections were carried out each year. Since 1991, 40,000 such investigations, representing about one third of all employers, have been undertaken. Overall, the increased inspection activity has a positive effect and will be continued with planned inspections of at least 10,000 employers taking place each year in future.
These inspections comprise a mixture of comprehensive inspections of employer records and visits where the employers are made aware of their responsibilities with regard to the social welfare and tax laws. In addition, inspectors also ensure that employees are not concurrently working and claiming a social welfare payment. This global approach to investigations is proving to be very effective. The best place to detect working and claiming is at the work place and this is borne out by the experience of my officials working on the ground.
The regulatory powers provided for in section 11 will be used initially to require employers in the construction industry to keep records of employees and people engaged by them under a contract for service, contractors, sub-contractors and their staff. The records in question will have to be kept in the site office and be available for inspection by social welfare inspectors. The need to target the construction industry is evidenced by the results achieved so far by the special anti-fraud unit which I set up last year. So far, this unit has inspected more than 550 building sites in the Dublin, Wicklow and Kildare areas and its activities have already saved the taxpayer around £2.5 million. The unit identified 600 people drawing social welfare payments illegally as well as detecting irregularities in PRSI payments. Those found illegally drawing payments are now facing the prospect of prosecution in the courts and those convicted can expect to receive severe penalties including jail sentences. In two recent cases, jail sentences of two years and ten months respectively were imposed. Two new squads in Dublin and one in Cork have now been set up as a result of the success of this initiative.
My Department is also pursuing employers in the construction and other industries to ensure that proper employment records are being kept for all employees and that proper notification is being made of new employees and sub-contractors. In many cases people who defraud the system are being helped, sometimes unknowingly, by employers who fail to comply with these requirements. Failure to comply renders employers liable to prosecution and to repay any social welfare payment drawn illegally by their employees. For example, in a recent case an employee who was in receipt of unemployment assistance was discovered working on a site in North County Dublin. The employer failed to notify my Department that the person had taken up employment with him and as a result, has been surcharged with the amount of unemployment assistance illegally claimed by the employee, some £200 per week.
The regulatory powers I am providing in section 11 of the Bill will complement the existing provisions under which employers and other people in the construction, forestry, security, road haulage and certain other industries are required to notify my Department of new employees and subcontractors engaged by them. This year alone almost 13,500 such notifications have been made to my Department.
These measures have been widely welcomed by legitimate employers anxious to ensure fair competition within industries so that unscrupulous employers will not be able to undercut their competitors and cheat the taxpayer.
Other special units have been operating in my Department with great success. These include the special investigation unit which works with the Revenue Commissioners. External control units operate to ensure that those receiving payments from the Department are legitimate recipients.
The various control activities undertaken by my Department have saved the taxpayer some £84 million in 1992. This year it is likely to be of the order of £100 million. The total saved since these control initiatives began in 1991 will be well over £200 million by the end of 1993.
On the wider issue of social insurance, Deputies will be aware of the recent public debate about the level of employers' PRSI contributions and their possible negative impact on jobs in labour-intensive manufacturing industry. I met representatives of the Irish Clothing Manufacturers Federation recently who argued that lowering the rate of contribution would help firms trying to maintain and increase their employment levels. This is an issue I plan to address in the immediate future in the context of the report of a working group under the chairmanship of my Department.
Irish employers already pay rates of PRSI contribution which are low by international standards. A further problem for some sectors is lower wages and labour costs in the United Kingdom, our nearest competitor. The rate of employers' PRSI in the UK is related to wages. Wages under £140 a week attract an employer contribution of 6.6 per cent or lower. In Ireland the standard rate of employer PRSI is 12.20 per cent of earnings. While there is no upper ceiling in the United Kingdom system, unlike here where PRSI stops at £21,300, the lower rate of PRSI available gives United Kingdom competitors a significant advantage in the cost of their production. Any restructuring of rates which reduces the income of the Social Insurance Fund will have to be assessed in the light of the need to maintain the value of benefits paid out of the fund. If a restructuring of employers' PRSI can make a useful contribution in the fight against unemployment, I will move quickly and positively to introduce whatever changes are needed.
In this regard, I have extended to April 1994 the closing date for recruitment of new employees under the employers' PRSI exemption scheme I introduced earlier this year. This scheme has been made more flexible in order to encourage a greater up-take and, unlike previous schemes, operates for a two year rather than a one year period. To date almost 3,400 employees have been approved under this scheme and a further 400 applications are being processed at present.
I would like to make known to the House that I will be introducing a technical amendment to the Pensions Act during the Committee Stage of the Bill. The purpose of the amendment is to confirm that the selection of trustees requires a majority of members of the scheme who actually vote rather than a majority of the members of the scheme. There has been some confusion about this issue. To make it absolutely clear, I should say that I shall be introducing an amendment demonstrating clearly that the majority relates to a majority of the members present and voting. There are other conditions governing the numbers of members who should be present.
The regulations I made in July last to enable members of pension schemes to elect their own trustees become effective on 1 January next. The regulations provide that members of the country's 31,000 occupational pension schemes will be able to choose their trustees to represent them. There are almost 500,000 members of occupational pension schemes. I provided a substantial lead-in time for this development to give employers, trustees, pension schemes and trade unions ample time to prepare and train people to become member trustees. I made the regulations early purposely so that everybody involved would have time to consider the implications——
