Vol. 532 No. 2
I move amendment No. 16:
In page 7, between lines 7 and 8, to insert the following:
"(3) The Minister shall, as soon as may be after the passing of this Act, prepare and lay before both Houses of the Oireachtas a report with the objective of ending the existing financial discrimination in terms of child benefit in respect of multiple births.".
I move amendment No. 19:
In page 8, between lines 18 and 19, to insert the following:
"(5) Noting that the tax year 2001 is of 38 weeks duration and noting that tax allowances are allowable at a 74 per cent of the normal annual rate, that the Minister shall as soon as may be after the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the impact of section 8 on tax payers who will no longer be entitled to receive the PRSI ‘tax holiday' in this tax year.".
This amendment relates to the PRSI holiday, as it is known. People pay PRSI contributions to the social insurance fund. There is a ceiling for employees above which they do not any more PRSI. The ceiling for the tax year 2000-01 is £26,500 and the Minister announced in the budget that for the tax year April to December 2001 the ceiling will be £28,250.
On the face of it one might say the ceiling is increasing slowly, as it has done every year. It will probably increase again this year. However, that is not the case. Last year, people paid the normal taxes they were required to pay and their PRSI. The tax year April to December 2001 is a short tax year of 38 weeks duration so a total of 74% of the various allowances are allowable against one's tax liability. The personal allowances – the Minister, Deputy McCreevy, reminds us they are now credits – are allowable at a 74% rating so everything is reduced by 74%.
The Ministers, including Deputy Dermot Ahern and Deputy McCreevy, emphasised in their contributions on the budget that they were returning tax to the people. People would pay less tax than they paid last year and everything in the garden was rosy. However, look at the small print. What has happened to the PRSI ceiling? Nothing. One would have expected the PRSI ceiling to be reduced to 74% like the other allowances but that has not happened. That is a major failure on the part of the Government.
I do not accept the figure given by the Department of Social, Community and Family Affairs in correspondence about this issue. The figure of 304,000 people was given by the Minister for Finance not long ago and I accept that. A total of 304,000 people are expected to reach the PRSI ceiling in this tax year. That means they had income in excess of £26,500. They paid PRSI on income up to that amount but when they reached it they stopped paying PRSI. Some of them are not paying PRSI at present. One would have expected that, in the coming tax year, April to December 2001, anybody who got a PRSI tax holiday during the previous tax year would also qualify for a PRSI tax holiday in this tax year. That seems reasonable. The Government spoke about reducing taxes and giving people back their money, so one would have expected that if one qualified for the PRSI holiday last year one would also qualify this year. However, that is not what the Government has done.
The Government will take PRSI contributions from a large number of people who would have expected this PRSI holiday. According to the Government's figures, the number involved is about 200,000 people. Probably in excess of 200,000 people will pay PRSI over and above what they would have expected to pay.
Why did the Government do this? The Government did so by sleight of hand as it wanted to gather additional revenue. The Minister will say I am talking about people on good salaries. These people are relatively well off. However, if the Government is talking about fairness and equity it should not impose additional taxes on people this year.
The Minister will also tell me that these people will not lose out – that they have had a PRSI holiday in the tax year 2001 and they will have a similar holiday in 2002. I am not sure if the Minister is fully aware that in the tax year 2000-01 – April to April – these people will hit the PRSI ceiling and have a PRSI holiday in this part of the year. However, there is a shorter tax year from April to December of this year and most people will not get the PRSI holiday in that period. In the tax year 2001 we will be back to the same situation and they will qualify for a PRSI holiday.
The Minister will say these people will get a PRSI holiday in 2001 and 2002. This is so but he is talking about three tax years rather than two. He is mixing up calendar years with tax years and that is not allowable and is unfair.
The case has been made and has attracted media attention. This issue is affecting a large number of people and, in the interests of fairness, and if the Government is earnest in saying it is not taking more tax off people and people will have reduced tax liabilities in the coming tax year, then people should not have to pay additional PRSI which they would not have had to pay if the tax holiday was brought back to 74%.
The Deputy is wrong. If I understood him correctly he disproved his case by giving the periods of time. However, it is important to put on record that this amendment proposes that PRSI contributors are being disadvantaged as regards the employee annual ceiling which would apply in the transition tax year 2001. That is incorrect.
I am anxious to clarify the situation and there is no gain to the State or no loss to the taxpayer as a result of these changes. Normally employees who have an annual earning in excess of the ceiling have a period referred to as the PRSI holiday at the end of the tax year where they do not make an employee contribution. In the case of a person earning £36,000 per annum, this period would run from mid January to 5 April in a normal year.
In the transitional year 2001 this contributor will pay PRSI from April to December 2001 and continue to pay PRSI from 1 January 2002. He or she will have a PRSI holiday in the period October to December 2002. The overall effect is a delay in the commencement of the PRSI holiday period by nine months on an ongoing basis. There is no loss, it is only a delay in the period.
This contributor will not lose out as a result of the alignment process. He or she will have two holiday periods – one in each of the calendar years 2001 and 2002.
They are not tax years.
They are tax years because that is the change. The only change is the period when the holiday comes into effect. Overall all employees who pay at the main rate will gain as a result of the 0.5% reduction in the employee rate from 4.5% to 4%.
There is no justification on the grounds of equity for a reduction in the PRSI annual earnings ceiling in 2001. Any such reduction would only benefit higher earners – 13% of all employees – and that is what the Deputy is proposing. That would be a gain if it was allowed but there is no loss to anyone.
If a reduction of 26% was adopted, these contributors would pay less PRSI in the calendar year 2001, unlike all other contributors. This would represent a once-off gain to a relatively small number of high income earners.
It is important to remember that I am also making provision in the Bill so that no one will be disadvantaged with respect to entitlement to benefits as a result of the nine month short tax year. It follows, therefore, that it is also appropriate that PRSI contributors make the same contribution as they would ordinarily make in the nine month period from April to December of any year. A similar situation will apply to income tax and this is the purpose of the 74% reduction in tax allowances. Employee PRSI is not an allowance and, therefore, there is no necessity to reduce it. To do so would be unfair to the vast majority of contributors.
Employee PRSI is payable on a non-cumulat ive weekly basis up to an annual earnings ceiling. The Bill provides for reductions to 74% of normal income in the minimum amounts of PRSI payable by certain low income contributors. This includes the self-employed, voluntary and optional contributors. These reductions reflect the fact that the income of these persons will be approximately 74% of normal in 2001. Similarly employees will receive approximately 74% of their normal PRSI free allowance in 2001. It is not necessary to legislate for this as these allowances are only available on a weekly basis.
The situation in respect of the ceiling is different. Persons normally earning below the ceiling over a 52 week period will pay less PRSI each week in the short year 2001 – 38 weeks in the case of most weekly paid employees. All these persons will then be awarded an extra 14 contributions to bring their annual record up to 52 contributions. The 14 contributions are effectively free contributions and can be used in due course to qualify for benefits.
In 2001, persons normally earning more than £36,655 in a full 52 week year will have earnings in excess of the £28,250 ceiling. Accordingly, they will have a period in the 2001 short year in which they will have a holiday. This will be the same period in which they would have a holiday up to December of each year. They will also have 14 contributions added to their record and would normally have had a holiday for the period January to March 2002. This is now postponed from October to December 2002. That is the net effect of what we are doing. It is a question of timing and there is no gain or loss to anyone.
Persons normally earning between £28,250 and £36,655 in a full year will also have earnings below the ceiling in the 2001 short tax year. They will pay PRSI as normal in each week up to December 2001 and 14 extra contributions will be credited. They would normally have had a holiday for part of the period from January 2002 to March 2002. This is now postponed to the relevant part of the period from October to December 2002. The reduction in the ceiling which I think is being proposed by the Deputy, would award a once-off gain to those high earners, as I have mentioned in relation to those with 38 weeks in a normal short year, and the other people earning over £36,000. The Deputy's suggestion that a 74% ceiling should apply would mean that a relatively small group, 13% of all employees, would have an extra bonus of up to £7,345 of income free PRSI. This should be contrasted with a worker on average industrial earnings who would pay PRSI each week in 2001 as normal. In other words, the Deputy is maintaining that the average worker should continue to pay the normal amount of PRSI each week in 2001, while higher earners should be exempted, through artificial means, from paying the same amounts of PRSI as they would normally do each week during the period April to December 2001. I am putting all this on the record so that it can be examined by the Deputy. I did ask him to dis cuss this matter with my officials but I am not sure if he did so. The offer is there if he wants to discuss it with my officials.
I already did so.
The Deputy wants to let these higher earners off paying PRSI for extra weeks in 2001. That would be the effect of his proposal. I reject this approach as being iniquitous.
The Minister is still an illusionist.
Deputy McGrath is.
No, the Minister is.
The PRSI system is not a tax system.
He swept away three months.
I am surprised to see Deputy Broughan of all people, the so called socialist, supporting this.
All contributors, be they low, middle or higher earners, will be fully protected from a benefit point of view if and when they come to make their claims in due course. It would appear that the Deputy is not committed to the underlying social solidarity aspect of the social insurance system and wishes to give once off monetary gains to those more fortunate in society while ignoring the average worker.
All that is happening here is a postponement or delay in the PRSI holiday by six months, on an ongoing basis. The contributor will not lose out as a result of this alignment. He or she will have two holiday periods in each of the calendar years 2001 and 2002. The only change is the period when the holiday comes into effect. I can say no more than that, so the Deputy and I will have to agree to differ. If he can come up with some other expert evidence to suggest that people are losing out as a result of this, I will stand corrected.
If I come up with the evidence will the Minister change the system?
I will not have to.
There you are. The Minister is all wind.
My strong advice is that what the Deputy is suggesting is wrong. The benefit year has always been the same as the calendar year.
It has not.
The benefit year is what we go on in this Department. The income to the social insurance fund has always been accounted on a calendar year basis.
No.
It is used to pay the benefits in the year in which it is collected. It is a pay as you go scheme.
No, it is not. That is incorrect.
The number of contributions required to qualify for benefits is related to the income tax year. That is the reason we are adding on 14 contributions in order to allow people to maintain their record, and for no other reason.
Stick to the script.
I think the Minister should stick to the script. He has inadvertently misled the House again. On Monday I was discussing this issue with my daughter. She had seen the piece that appeared in the paper and said: "I know what you are talking about now because when I got my wages I do not pay any PRSI now. I have gone over £26,500". That happened this week. If the PRSI holiday is based on a calendar year, how could anybody have a PRSI holiday in the month of March? It is based on a tax year from April to April. That is why this PRSI holiday kicks in in the period at the end of the tax year. I am afraid the Minister does not fully understand it but that is all right, he will not make the decision anyhow.
When he says the tax holiday for 2001 will be postponed to 2002, that demonstrates clearly that he does not understand it because 2002 is a totally different tax year. It is an individual tax year starting in January and any PRSI holiday cannot be carried over into a new tax year. For PRSI purposes, one must start from base, going from zero and building up. The PRSI holiday in 2002 will occur at the back end of the year – in October, November and December.
The Minister also got another point wrong. He asked whether it was fair that ordinary PAYE workers should pay PRSI for 12 months of the year while some privileged people will not pay for 12 months. That is the system the Minister has at the moment. Where does this PRSI holiday come in at the moment? It comes in because the better paid do not have to pay above the ceiling. The Minister is saying that system is wrong, yet he keeps it going year after year. He is perpetuating it.
Nonsense.
The Minister is saying it is not fair this year, but he has had that system in place all the time. Those are the facts. The Minister also said that well off earners could not get a PRSI holiday in this tax year, but some of them will at the back end of this year, in November and December, depending on their income. As soon as their income hits £28,250 they will get a PRSI holiday. The very well off will get that.
The Minister says that, according to the provisions in section 28, self-employed and other voluntary contributions should be reduced to 74%. If the Minister is reducing those contributions to 74%, why does he not also reduce the others?
In his contribution the Deputy stated the factual position – that his daughter is currently on a PRSI holiday. Is that not correct?
Correct.
She will gain a PRSI holiday next year, if she is still in employment, at the end of next year rather than at the start.
But not in the 2001 tax year.
As of next year, the tax year will be going from 1 January.
It will be, but not now. Point made. I thank the Minister.
The Department bases itself on the calendar year for benefits, and that has always been the way.
Not until next January.
Nobody will lose as a result of this, so the Deputy is wrong. He is suggesting that someone would have a third PRSI holiday, three holidays in two years.
In three tax years.
No, in calendar years. That is all it is. There will be no gain or loss to anyone. The Deputy is absolutely wrong.
Amendments Nos. 23, 24 and 31 are related and may be discussed together, by agreement.
I move amendment No. 23:
In page 16, between lines 44 and 45, to insert the following:
"(2) The Minister shall, as soon as may be after the passing of this Act, prepare and lay before both Houses of the Oireachtas a report considering the implications of:
(a) increasing the respite care grant to £1,000 to all carers including those who are excluded by virtue of a means test, and
(b) removing the disqualification, whereby carers in receipt of social welfare payments are excluded from qualifying for a carer's allowance in special circumstances.”.
In the short period left, I wish to deal with the issue of carers. If one group of people are rightly annoyed at the poor treatment they received in the budget and in this Bill it is the carers. Despite all the pomp and arrogance the Minister displayed on this issue, both in this House and on Committee Stage, he has not given way to a substantial increase in the carer's allowance structure and particularly in the respite care grant. My party has adopted a consistent position on this matter which we outlined in our submission last November. We are specifically seeking two things. Respite care grant should be increased to £1,000 for all carers, including those who have been excluded by virtue of the means test. Second the entire disqualification system, as currently applied, is unfair. It excludes a whole section of people who are carers on a 24 hour, seven day a week basis, without any recognition from the State.
This is a huge constituency of people who will be up in arms whenever the next election is called. Despite the kind of patronising response from the Minister's Department so far, in terms of assessing the number of people who are in this category, he knows and we know that more than 100,000 persons within the category of carers are getting precious little help from the State. As the Minister has repeated a number of points in the course of the debate, I also repeat that the Government has at its disposal an unprecedented £6.1 billion Exchequer surplus this year. Surely, the range of areas to be supported should particularly include the less well off.
Carers are a classic example of a sector which needs our support. Yet, after four years in office and despite all the announcements made by the Minister from time to time, we have not seen any noteworthy improvement in this area. Yes, another three or four thousand people will be in the scheme this year. So what, when one considers that there are some 110,000 people in this group? This Fine Gael amendment and the related Labour Party amendments, should be central to this debate. Even at this late stage, the Bill should be amended to take care of that section of our people who have been so badly treated and let down by this arrogant Government.
It is regrettable that the debate on this Bill is to be guillotined. I know all the Sections are important but this group of amendments relates to perhaps the most heroic group of people in our society. Some representatives of carers were present earlier. It is only right that the House should vote on the issue, so that people will know where we stand in relation to carers. The forthcoming division is essentially a vote on the carers' issue and on the Minister's performance in that regard. The basic reality is that we do not have any proper provision for the rights and needs of carers, either as a constitutional guarantee or by legislation. The Labour Party's proposed constitutional amendment on the issue was shot down by this Government.
The very modest amendments which we are now discussing, would give a basic increase of £1,000 per carer in respite care grants. The Minister gave a miserly £100 this year. A major opportunity was missed to deal with one of the greatest needs of carers, namely to have some time to themselves, to get their own health needs assessed and to have some little respite from their caring routine of a 24 hour day, seven days a week.
Since Committee stage, the Minister sent me another copy of the 1998 review on carers' allowance, to indicate the basis for his Department's estimate of 50,000 carers. Having studied it carefully, I still believe it grossly underestimates the situation. The Carers' Association's estimate of 120,000 is a more realistic figure, based on international comparisons across Europe and particularly with Britain. Yet, as a result of the Minister's action, we will now have just 17,000 people covered by carers' allowance and a couple of hundred by carers' benefit. The new 'disregards' of £125 and £250 which he introduced, may benefit another 5,000 or 6,000 people. Even on the Minister's figures, probably a significant majority of carers are still receiving no assistance, no respite grant such as these amendments called for and certainly no fundamental carers' allowance. That is a testimony to this Minister's failure.
Amendment No. 31 asked for some relaxation on the rule whereby, for example, a lone parent caring for a parent with great disability, could draw some portion of the carers' allowance, in addition to her other social welfare benefit. Once again, the Minister has refused to agree to that.
The other major issues raised in the amendments, which we can only discuss very briefly in the limited time available, relate to the need for a continual-care payment and a cost-of-caring payment, on which the Government has absolutely refused to make any concession. The proposals by the Labour Party and by Fine Gael for a weekly payment of at least £25, have also been rejected by the Minister. The response to our amendments shows a fundamental failure on the part of this administration. Despite being in his Department for a term now approaching four years, he has lamentably failed this most vulnerable group for which he has responsibility. Was it not—
Deputy Broughan, without interruption please. Time is limited.
Was it not significant—
Please, Minister, allow Deputy Broughan to speak without interruption.
Was it not significant that, at a major public meeting in Limerick last week on the great needs felt by carers, which this Government has not met, nobody turned up from either Fianna Fáil or the Progressive Democrats to defend the Minister's case. His ministerial colleague did not attend, because he knows the case is threadbare. On this issue alone, it is time this Minister was ejected from office.
It is only a few years since the then Minister for Social Welfare, Deputy Woods, introduced the carers' allowance system. That was done by this side of the House. The present opposition parties did nothing on the carers' issue when they were in Government.
I am delighted the Minister has now increased the limit for carers' allowance from £150 to £250. That will enable many more people to qualify for the allowance. I particularly welcome the change in the distance limit. Instead of the original requirement that a carer had to live in the same house as the person being cared for, carers can now live some miles apart and still qualify. That is one of the most beneficial improvements which this Minister has introduced.
Deputy Brennan was responsible for the introduction of that change.
The Minister should send him down to Limerick on the next occasion.
Allowing people living a few miles from a person for whom they care to qualify for carer's allowance is the most beneficial change to the scheme the Minister has introduced. I approached the Minister about a person who was living five miles from her father and mother for whom she cared. The person in question did not qualify for payment but, because of the change brought in by the Minister, she now qualifies. That is a welcome development.
As it is now 10 p.m., I am now obliged to put the following question in accordance with an order of the Dáil today: "That the Fourth Stage is hereby completed and the Bill is hereby passed."
The Bill will now be sent to the Seanad.
I would like to thank you, a Cheann Comhairle, your staff and the members of the Opposition for the work on the Bill both on Committee and Report Stages, and also to thank my staff.
