I echo Deputy Coveney's remarks in regard to the sudden death of a relative of the Minister for Finance. It has been a difficult day for him in that respect and I thank the Deputy for his remarks which will be appreciated.
The social, community and family affairs budget which the Government has brought before the House is a radical one. It is one of the most substantial social affairs budgets ever presented. At a time of unprecedented economic growth, there is a grave onus on Government to ensure this prosperity is shared and that those who are less well off are afforded every opportunity to participate in the workplace. This first budget is a substantial response by the Government to the challenges that face society. One of the key objectives of the Government is a commitment to fight social exclusion, tooth and nail and this is no mere rhetoric. This budget is putting it into action.
It must be set firmly in the context of the broader agenda, the fact that Ireland is at a moment of historical importance in its development. The advent of the Celtic tiger, the achievement of peace in Northern Ireland, the initiation of all-party talks, and moves towards closer European integration are just some of the key developments which are currently reshaping Ireland. The economic outlook is extremely favourable with projected economic growth of 7 per cent of GNP in 1998 and nearly 5.5 per cent in 1999 and 2000. Employment is projected to grow by 120,000 over the next three years while inflation is expected to remain at 2 per cent per annum. It is vital that this opportunity is seized to redefine society in a way which makes it more inclusive and which shares the benefits of growth among all our citizens.
The budgetary process must play a key role in that redefinition of society. The budget delivers on the commitments made in An Action Programme for the New Millennium. It provides the clearest evidence of its determination to ensure current record levels of economic growth are sustained; the economy is managed in a responsible and prudent manner in the interest of all citizens; the benefits of economic growth and social solidarity are maximised, and problems of social exclusion and marginalisation are tackled effectively at source.
The national anti-poverty strategy framework put in place by the Government, and, in particular, by my Department, will ensure key objectives on social inclusion are delivered across all Departments and public bodies. In this, the first budget to be prepared by the Government, we will set out the first steps of the redefinition I referred to earlier — to highlight the priority areas for future development of our system of social, community and family support as we move into the new millennium. Unlike Deputy de Rossa who spoke endlessly about the need for a strategic approach and yet chopped and changed from one year to the next, I will provide a coherent and focused approach to welfare reform.
In the 1980s and early 1990s we were faced with particular economic difficulties, including very high unemployment, to which the social welfare system had to respond. That situation has now changed dramatically and thanks to the macroeconomic benefits of social partnership and prudent financial management of the economy, Ireland is going through a period of intense economic and employment growth. Live register unemployment has dropped to levels unknown since 1990.
At the same time we are faced by new priorities. The number of older people is growing and will continue to increase significantly in coming years. The needs of people with disabilities and carers are achieving the recognition which they deserve. Furthermore, the addition of new responsibilities in regard to the community and family has raised new challenges for my Department.
In formulating the social, community and family affairs budget package, we have, drawing on the key objectives set out in the An Action Programme for the New Millennium, responded to these priorities by identifying five key themes which are securing the future for our older people; improving the real value of social welfare payments; supporting people with disabilities and carers; investing in employability and developing family and community supports. In formulating the detailed measures set out in the budget, we have drawn not only on An Action Programme for the New Millennium, but on the election documents of both parties in Government and the guidance of colleagues in this House and the Seanad.
The social, community and family affairs improvements in this budget package deliver on these key objectives. Costing an additional £125 million in 1998 and £225 million in a full year, this package represents a substantial first step in implementing our action programme. It also delivers on key commitments made in Partnership 2000. Above all, it reflects our belief that there is a need for a multifaceted approach to social welfare reform, an approach which will provide a secure income for those who rely on social welfare for some or all of their income, a real improvement in the position of our elderly citizens, real incentives to the unemployed to take up education, training and work opportunities, and which will support people and communities in their efforts to improve the quality of their lives.
One of the true marks of a progressive society is the regard in which its older citizens are held. As a nation we owe a tremendous debt of gratitude to the elderly. They have helped build the modern Ireland of today. They have ensured that their sons and daughters were afforded the best in life, often by making great sacrifices themselves. Older people should know that their country holds them in the highest esteem and that their contribution to the building of this nation is never taken for granted. However, research carried out by the ESRI and funded by my Department has shown that the relative position of older people has declined in recent years.
In response to this, the Action Programme for the New Millennium provides that contributory old age pensions will be increased to £100 over a five year period. In recognition of the fact that our older people have helped to build up the country into what it is today, we have decided to go beyond what is strictly required by that commitment in the first year and to give a special catch-up increase of £5 per week in the maximum personal rates of payments for pensioners aged 66 and over, with pro rata increases for people on reduced rate contributory pensions.
This increase will apply not only to people receiving contributory and non-contributory old age pensions and retirement pensions, but also to other people over 66 such as those in receipt of widow's and widower's pensions, blind person's pension, carer's allowance and a number of other payments and to people over 65 in receipt of invalidity pension.
In percentage terms, the £5 rise represents increases ranging between 6.4 per cent and 7.4 per cent. With an expected inflation rate of 2 per cent for 1998, the new payments represents real increases of between 4.3 per cent and 5.3 per cent for those receiving £5 per week. For example, a couple both of whom are entitled to get an old age contributory pension in their own right will now receive £166 per week — an increase of £10 per week. A couple, one of whom is entitled to a retirement pension with an increase in respect of a qualified adult over the age of 66, will receive £139.90 per week — an increase of £6.50 per week.
The real increases this year of between 4.3 and 5.3 per cent compare to the situation under the so-called rainbow Government of no real increase in 1995 — remember Deputy De Rossa's miserly 2.5 per cent increase at a time when inflation was 2.5 per cent, a real increase of 0.7 per cent in 1996 and only 2.5 per cent in the so-called election budget of 1997. Even the Deputies opposite must admit that this is the best real increase for pensioners in a long time and delivers, in one fell swoop, a higher percentage increase than Fine Gael, Labour and Democratic Left provided over the lifetime of their Government. This increase will benefit some 324,000 claimants, about 36 per cent of all social welfare claimants. It will mean that social welfare payments to older people will be above the minimum rate recommended by the Commission on Social Welfare.
In recognition of the fact that the budget this year comes earlier in the year, we have decided to bring social welfare increases into effect from the first week in June 1998, providing an additional two weeks increase in 1998 compared to this year. I am pleased that increases in all weekly social welfare payments will be brought forward to the first week in June 1998.
In addition to the rates increase for older people, I am also introducing an important improvement to the free travel scheme. With effect from October, 1998, the free travel companion pass will be extended to cover all pensioners, aged 75 and over, who are unable to travel alone. This measure will address one of the features of the free travel scheme which has been the subject of some criticism, that is, where a person who is entitled to the free travel pass is unable to avail of it because he or she cannot use public transport without the assistance of another person. The free travel companion pass will enable someone to accompany the pass holder at no additional cost. It is estimated that as many as 17,000 people will benefit from this measure.
Revised capital assessment provisions which improve the position of the vast majority of pensioners affected will be extended from June 1998 to include the rent allowance which covers former controlled tenancies.
In the means test for the widow's and widower's non-contributory pension, I am introducing provisions with effect from April 1998 to exempt rental income from the assessment of means where the income is in respect of a person who lives with and pays rent to the pensioner.
Taken in conjunction with the extremely beneficial tax changes announced yesterday by my colleague, the Minister for Finance, in relation to the elderly, these measures, and in particular the £5 increase, enormously improve the position of pensioners.
Partnership 2000 guarantees that the real income position of those dependent on social welfare will be protected and enhanced and that the minimum rates recommended by the Commission on Social Welfare will be implemented before the end of the Partnership 2000 in 1999. In this budget I am delighted that we are able to provide a general increase of £3 for all those claimants not already benefiting from the higher increases for older people, with pro rata increases for people on reduced rate contributory payments, together with a 3 per cent increase, in general, in the rates of qualified adult allowance. This increase will be paid from the first week in June 1998. The £3 increase means that payments will rise by between 4.2 and 4.6 per cent, that is, a full 2.2 to 2.5 percentage points above expected inflation in 1998. Apart from the 324,000 people who will gain from the £5 increase, a further 566,000 people will benefit from this £3 rise.
As a result of these substantial increases, the two lowest payment rates — short-term unemployment assistance and the supplementary welfare allowance involving 57,000 people — will now have risen from 95 per cent to 98 per cent of the rate recommended by the Commission on Social Welfare. All other social welfare payment rates will have exceeded the CSW rate.
Among those currently on rates of payment below the Commission's recommended rate, £70.10 in 1998 terms, and who will move over that rate as a result of this budget are recipients of the old age non-contributory pension, widow's and widower's non-contributory pension, one parent family payment, deserted wife's allowance, prisoner's wife's allowance, blind person's pension, disability allowance, injury benefit, disability benefit and unemployment benefit.
To illustrate the scale of these changes, the House will be interested to learn that 93 per cent of people who rely on social welfare payments will now receive more than the CSW recommended rate. Unlike the previous Government which talked a lot about it but did not match rhetoric with performance, this Government, in its first budget, has more than achieved the recommended CSW rates for the vast majority of those who rely on social welfare payments. The full cost of these increases will amount to almost £108 million in 1998 and £181 million in a full year.
I mentioned at the outset that this budget was being presented by a Government which is delivering on its commitments. The increases in rates represent real and tangible progress towards meeting the commitment we made in our action programme to provide substantial social welfare increases, as well as the commitment contained in Partnership 2000 to reach the minimum rates recommended by the Commission on Social Welfare over the lifetime of the partnership.
In line with the commitment in the action programme to implement the report of the Commission on the Status of People with Disabilities, I am delighted to announce that we are meeting one of the key recommendations of the commission in my area by bringing all disability payments to over 100 per cent of the minimum rate recommended by the Commission on Social Welfare. The general £3 increase will bring the current lowest disability payments — disability allowance and blind person's pension — to £70.50 per week, which is over the commission's recommended rate.
The Commission on the Status of People with Disabilities has highlighted the importance of independence for people with disabilities. I have already announced a package of £5 million which will help people with disabilities to live independent lives. In order to facilitate people with disabilities in taking up rehabilitative work, I am announcing a significant increase in the amount which people in receipt of disability allowance and blind person's pension can earn without affecting their payment, from the existing £36.30 up to £50 per week.
The Commission on the Status of People with Disabilities recommended that incentives to take up employment should be available to people on disability payments. I am committed to ensuring that this recommendation is implemented by providing access to the back-to-work scheme operated by my Department and measures such as the income disregard announced today. I will look at this issue in the coming months to see what further measures can be implemented to support people with disabilities in gaining access to employment.
I am also introducing a change in the free scheme rules which will be of benefit to invalidity pensioners and recipients of disability allowance and blind person's pension. In future, people who transfer from one of these payments to another social welfare pension, for example, the widow's contributory pension, will be allowed to retain their existing entitlement to the free schemes. This change recognises that, in the great majority of cases, such people will continue to be disabled and they should not lose out on transferring to a different type of pension payment.
Carers play a crucial and often invisible role in communities. Many of them feel isolated as they go about their work, while some may feel a lack of appreciation. Governments should care for the carers and acknowledge the value of their contribution in a practical manner. The action programme provides that the value of the carer's allowance will be increased in real terms. As announced, this year we are increasing the allowance for carers over the age of 66 by £5 per week, with a £3 increase for carers under 66 years.
We are also providing, with effect from October 1998, that all recipients of a carer's allowance will be entitled to a free travel pass in their own right. At present, a carer can only travel for free when accompanying the person for whom they are caring. This measure will provide them with a degree of independence and will facilitate them in getting out and about and keeping in contact with family and friends. I am also introducing provisions which, in the case of the carer's allowance, will allow for the disregard of non-national disability pensions up to the level of the maximum rate of old age contributory pension.
The carer's allowance is currently under review in my Department. This review is considering the purpose and development of the scheme and its future potential both in terms of its operation and in the wider context of care provision in the home generally. It will also examine the potential for the development of provisions for carers through the social insurance system and the role of the private sector. In the light of that review, I will bring forward a range of measures in next year's budget.
I want to refer to employment support and the measures being introduced in the budget. Unemployment is falling, while strong economic growth is leading to massive job growth. This is in stark contrast to the position a few years ago when we were faced with a stagnant job pool and high levels of unemployment. Unemployed people often found themselves in a hopeless cul-de-sac. Fortunately, the position has changed dramatically for the better and we must refocus our policies radically in order to get the best from the Celtic tiger.
This refocusing is being undertaken against the background of a sustained reduction in the numbers signing on the live register. It is worth pointing out that the live register includes people who are working part-time and others who are signing for credited insurance contributions. The downward trend in unemployment is forecast to continue. The latest analysis produced by FÁS and the ESRI suggests that job creation will continue to increase in the coming years. It is notable that the most rapid growth is predicted to be in the high skill occupations which require third level qualifications. It is also predicted that there will be high growth in sectors which require second level education and vocational training. It is crucial that the dramatic changes in the nature of the unemployment problem are mirrored by a radical change in our unemployment and social welfare policies. I am determined to ensure that my Department will be to the forefront in achieving that radical change. In line with EU guidelines, we must move from paying income support as a response to unemployment to investing in employability so that the unemployed can share in the benefits of economic growth.
The measures adopted in the budget reflect this changing approach. While the financial position of the unemployed has been improved substantially by the general £3 rate increase, we are targeting additional expenditure at those areas which will help to develop people's skills and support them in making the transition to work.
We are implementing the commitment in Partnership 2000 to calculate family income supplement on a net income basis. FIS is designed to ensure that we give unemployed people an incentive to take up work and employees an incentive to stay in work by providing an income supplement to low income families in employment. FIS currently supports the income of some 12,000 workers with families.
A drawback of the scheme was that entitlement was calculated on the basis of gross income and as such failed to take account of the effect of taxation on income. This meant that a FIS recipient's disposable income could be reduced as a result of entering the tax net because the person could also experience a decrease in the amount of FIS paid. Partnership 2000 contained a commitment to change the calculation of FIS from its present gross income basis to a net income basis and I am pleased that we are meeting that commitment in the budget. This move, which will take effect from next October, will strengthen the link between FIS and employment while overcoming the poverty trap associated with the current arrangements.
In examining the cost of this change, we were able to use more up-to-date data than was previously available. It was found that the cost was lower than previous estimates had indicated. Those estimates were based on 1987 survey data, updated to current terms. More recent data, based on the ESRI 1994 "Living in Ireland" survey, which was partly funded by my Department, has now become available. The estimates based on this data indicate that the cost is now considerably lower. The full year cost of the FIS changes in the budget is approximately £10 million.
We are also increasing the weekly income thresholds for FIS by £7 at each point with effect from June 1998. This will have the effect of making existing FIS recipients some £4 better off each week. These measures will significantly increase the level of FIS payable and the rewards from taking up employment. The combined effect of FIS, the back to work allowance scheme and the special tax allowances for the long-term unemployed announced yesterday by the Minister for Finance will ensure that people are always better off at work than on welfare.
We are also providing an extra 5,000 places on the back-to-work scheme, an additional year's payment for self-employed people on this scheme, bringing it to four years in total, and a new back to education programme. I recently launched independent evaluations of the back to work allowance and the area based allowance enterprise schemes. The main thrust of the evaluation shows that these schemes have been very successful in motivating unemployed people to get back to work. They have been particularly successful in motivating so-called "discouraged" workers to get back into the labour force by providing them with a link into employment. The Pacsort company in Dundalk in my constituency is an excellent example of the contribution these schemes can make in getting long-term unemployed people back to work.
The forecasts of survival rates look promising and already there are thousands of success stories involving people who were previously long-term unemployed and who were encouraged to start a business with the support of these schemes. Many of these entrepreneurs are now employing people and the benefits of these initiatives are reaching beyond their targeted sectors. As a result of these evaluations, we are providing for those who are long-term unemployed a further 5,000 places on the back to work allowance scheme from January 1998, bringing the total number of places up to 27,000.
We are also integrating the area based allowance more fully into this scheme. Up to now the area based allowance, which is equivalent to a full unemployment payment for the first year, has been available to those taking up self-employment only in areas covered by the area partnerships. The operation of the area based allowance in certain areas has, however, led to the creation of a two-tier system of financial support for those long-term unemployed who take up self-employment opportunities. To counter this, I am in effect introducing a four year back to work allowance in all remaining areas for unemployed people who take up self-employment. This will provide transitional support amounting to 100 per cent, 75 per cent, 50 per cent and 25 per cent of their unemployment payments over the four years. This measure will encourage a greater number of long-term unemployed people to seek to establish their own businesses.
There is a need for much greater emphasis on developing the skills and qualifications of people out of work. I have decided to bring together the existing second chance education schemes operated under my Department as part of a single back to education programme embracing both second and third level. The existing book allowance of £100 is being increased to become a cost of education allowance of £150 per year. I am delighted to announce that, for the first time, students with disabilities in receipt of disability allowance and blind person's pension will be able to qualify for the scheme. I will be making a further announcement in this regard shortly.
In 1992, only 1 per cent of the Department's budget on unemployment was spent on active measures to get people back to work and support employment. By 1997 this proportion had risen to 12 per cent and, as a result of the measures we have introduced in this budget, that proportion will increase to 15 per cent in 1998. I aim to achieve a target of 20 per cent by 1999.
A further way in which people can be encouraged to get back to work is through increasing their take-home pay. One of the objectives of the Government's action programme is the reduction of PRSI, with particular emphasis on the low paid. The £20 per week increase in the PRSI free allowance, announced by my colleague, the Minister for Finance yesterday, benefits more than one million employees. The measure will be particularly effective in improving the return from work for the nearly 60,000 employees who earn between £80 and £100 per week who will now be exempted from making an employee PRSI contribution. In addition, the earnings limit for the lower rate of PRSI is being increased to £270 per week. This extends the application of the lower rate to a further 27,800 employments. Almost two-thirds of all industrial, commercial and service sector employments, a total of more than 725,000 jobs, will now attract PRSI at the lower rate.
It must be remembered, however, that the incentives arguments in favour of PRSI reductions must be balanced by the equally important objective of preserving the social insurance fund. Social insurance plays a key role in the provision of social protection in society. People, when they are economically active, make contributions to the social insurance fund according to their ability to pay and depending on the range of benefits and pensions for which they are covered. These contributions will amount to approximately £1.92 billion in 1997, they fund the pensions of an earlier generation of contributors and pay benefits to persons who are not working because of unemployment or illness. Social insurance contributory pensions and other benefits are paid to more than 414,000 people and this number will increase as the age profile of the population grows. The implications of this increase have been highlighted in the actuarial review which I published recently and will be considered further in the light of the report of the national pensions policy which I expect to receive shortly.
The social insurance system represents a long-term contract between employers, employees, the self-employed and the Government. It achieves solidarity between generations by funding the payment of contributory pensions to an earlier generation of contributors and between those at work and those currently not at work. It is vital, therefore, that the social insurance fund is protected in the future so that it can meet its short and long-term commitments.
All the pro-employment measures I have described, in conjunction with the substantial beneficial tax changes announced yesterday by my colleague, the Minister for Finance, will provide a real incentive to unemployed people to avail of work opportunities, and effectively nail the myth that people can be better off on welfare.
In the area of family supports, there is general agreement that child benefit provides the best form of child income support. Child benefit provides support directly to the carers of children and, unlike other forms of child support, such as child dependant increases, it does not act as a disincentive to take up employment. There is widespread agreement that child income support policy should focus on improving child benefit and this will be the approach which I will take in this and coming years. In this year's budget I am introducing a range of measures to improve child benefit.
Across the board increases of child benefit are, however, very expensive but proposals by various commentators to target increases, for example, by making child benefit taxable, have their own difficulties. There is, however, another way to target child benefit. When the payment was introduced by Sean Lemass in the 1940s it was originally provided only to large families on the basis that such families were most affected by poverty.
Research carried out by the ESRI indicates that this is still true. For example, a two adult household with one or two children has a risk of poverty of 14 per cent. In contrast, a two adult household with three children has a risk of poverty of 22 per cent and this rises to 38 per cent for families with four or more children. Thus, by concentrating increases on the larger families, resources will be better targeted at those most in need.
Accordingly, as part of a long-term programme to improve child benefit significantly, particularly for larger families, we are providing for increases in child benefit of £1.50 for the first two children and £3 for all subsequent children to bring the monthly rates to £31.50 and £42 respectively. A family with four children, for example, will now receive monthly payments of £147 or almost £34 per week, an increase of more than £2 per week.
In line with election commitments, we are providing for a new payment of 150 per cent of the normal child benefit rate for twins. In other words, where there are twins in a family, each child will receive one and a half times the appropriate rate of child benefit. An estimated 12,500 sets of twins will benefit from this measure. We are also increasing the grants payable on the birth of three or more children to bring them into line with the existing arrangements for twins. This will mean that families with triplets, quadruplets and other multiple births will receive a grant of £500 on birth, at the age of four and at the age of 12. The improvements to child benefit which I have outlined will cost £28.5 million in a full year. Those improvements will take effect from September and will mean that more than 500,000 families and more than one million children will benefit. Taken with the significant improvements to the family income supplement scheme, the position of families with low incomes will be particularly enhanced.
It has been stated that we are giving less money by way of child benefit than the outgoing Government proposed in its so-called election budget, but the figures speak for themselves. The rainbow Government proposed an increase in child benefit totalling £8.33 million in the budget year and £25 million in a full year. Taking normal rates of child benefit and rates for twins, we are giving in this budget £9.46 million, nearly £1.2 million more in the budget year and £28.5 million in a full year.
Under this Government, the remit of my Department has been substantially increased. In this context, my Department has been assigned additional responsibilities which it will shortly take over. In line with the commitments set out in An Action Programme for the Millennium and informed by an interim communication from the Commission on the Family, I am pleased we have been able to make provisions in respect of a number of important new pro-family measures. In particular, I am moving to establish a national mediation service as provided for in the action programme through the provision of very significant additional funding to the Family Mediation Service in 1998.
We are also providing for a range of additional measures including the establishment of 25 new community and family centres; increased support for marriage and child counselling; the establishment of a family affairs unit in my Department and pilot programmes on parenting and family services. I will announce further details on these items in the near future.
Communities provide an essential support to the fabric of our society, a support which enriches and enhances all our lives and without which public services could not succeed. I am determined to ensure that community and voluntary organisations can grow and develop in a supportive and enabling environment. In 1998, I will bring forward a White Paper on the Community and Voluntary Sector. In addition, I will establish a community trust to bring business funding and know-how to support community development; in line with the commitment in Partnership 2000, I am providing additional funding to the Community Development Programme; I will establish a new community and family fund with additional funding for voluntary organisations. I am enhancing the capacity of the National Social Services Board to support volunteering and information provision by voluntary organisations.
In this first budget to be introduced by the Government, we have demonstrated our ability to deliver on the commitments contained in An Action Programme for the Millennium and in Partnership 2000. The spending increases provided for my Department's areas of responsibility are well targeted. The measures we are introducing will have the effect of improving the quality of life of the elderly, improving the living standards of the unemployed and those in low paid employment and enhancing the prospects of securing employment, removing disincentives to employment and increasing the return from work, improving the position of all families, particularly larger families who are at greatest risk of poverty, achieving greater social inclusion and enhancing the role of the community and voluntary sectors.
This budget delivers on Partnership 2000 by increasing the real value of social welfare rates, meeting the Commission on Social Welfare recommended rates for the vast majority of people on social welfare, putting family income supplement on a net income basis and extending the community development programme. It also delivers on the action programme by moving very significantly towards pensions of £100 per week, by improving the real value of the carer's allowance and disability payments and by moving to establish a national mediation service.