JOINT COMMITTEE ON SOCIAL AND FAMILY AFFAIRS díospóireacht -
Tuesday, 2 May 2006

Scrutiny of EU Proposals.

Acting Chairman (Deputy Carty)

I welcome the officials from the Department of Social and Family Affairs, Mr. Tim Quirke, Ms Anne Vaughan and Mr. Paul Morrin. I apologise on behalf of the Chairman, Deputy Penrose, who is unavoidably absent. I propose that the first presentation be on COM (2005) 94, which is the Green Paper "Confronting demographic change: a new solidarity between the generations".

Members are reminded of the parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses, or any official by name or in such a way as to make him or her identifiable. Members who wish to make a declaration on any matter being discussed may do so now or at the beginning of their contribution. Members are also reminded that if there is a possibility of conflict of interest, they should make a declaration of interest either now or at the start of their contribution. I draw the witnesses' attention to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. While it is generally accepted that witnesses would have qualified privilege, the committee cannot guarantee any level of privilege to witnesses appearing before it.

Mr. Tim Quirke

We welcome the opportunity to come before the committee to engage in a discussion on this issue. While we provided members with a briefing note on the issues raised in the discussion document, it might be helpful to give a brief overview and explain the next steps by the EU Commission in tackling these important issues. My colleagues will outline the implications of the demographic challenge in Ireland.

Last year, the European Commission published a Green Paper on confronting demographic change in the European Union and launched a public debate on the management of demographic change and the Commission's role within it. Over the next 25 years the overall population of the EU is expected to increase slightly from 458 million in 2005 to 469.5 million in 2025 and then to reduce slightly to 468.8 million in 2030. During the same period, the working age population will fall by 20.8 million, a drop of 7%, and the population aged 50 and over will increase by 51%. As the Green Paper explains, these demographic changes arise as a result of three basic trends: continuing increases in life expectancy; falling birth rates; and continuing growth in the numbers of workers over 60.

As a result of considerable progress made in health care and quality of life in Europe, people are living longer and older people are living healthier lives. By 2050 life expectancy is expected to rise to 81 for men and 86 for women and the number of people aged 80 and over will increase from 19 million now to approximately 35 million by 2030.

Fertility rates in all member states have fallen below the level — 2.1 children per woman — needed to maintain population levels across the Union. The Green Paper asked what could be done to meet the challenge of the increasingly low birth rates that have resulted from a number of obstacles to private choices. Such obstacles include late access to employment, job instability, expensive housing and lack of incentives such as family benefits, parental leave, child care and equal pay. The paper notes that incentives of this sort can have a positive impact on the birth rate and increase employment, particularly among females.

As stated, there will be 20.8 million fewer people of working age. The smaller workforce that will result from this will act as a brake on potential economic growth in the EU, reducing it from between 2% and 2.25% today to 1.5% in 2015. By 2040, growth will have fallen to 1.25%. Lower growth will come at a time when the costs relating to an ageing population — particularly those in the areas of pensions, health and long-term care — will begin to peak in many member states. While controlled immigration of workers is one possible way to increase the working age population and birth rates, it does not offer a long-term solution to falling birth rates and an ageing population. To meet the challenge, the Green Paper advocates that the Lisbon strategy for growth and jobs must be implemented in full.

Action is being taken at national and EU level to tackle the problem. At national level, member states are developing employment strategies aimed at attaining the overall EU employment target of 70% by 2010, including a 60% employment target for female workers and a 50% target for older workers. The Green Paper states that achievement of these employment targets is the minimum response required. It also stresses the need for member states to continue to modernise their social protection systems, especially those relating to pensions, to ensure their social and economic sustainability and enable them to cope with the effects of demographic ageing. Important reforms of pension systems and early retirement schemes have been introduced in several member states in recent years and are also being planned in others.

In its submission on the Green Paper, the Department of Social and Family Affairs highlighted a number of points. Employment conditions must be adapted to allow both parents the necessary flexibility to meet their care responsibilities. Family care of children and the elderly continues to be essential and must be backed up with adequate child care and elder care services, appropriate income support and other services. While well managed immigration can greatly assist in meeting labour market shortages, there is a real danger, in focusing on labour market needs, of losing sight of the social consequences of immigration for immigrants themselves and for society in their countries of origin and in the countries to which they emigrate. In this context, the European Commission could facilitate exchanges on challenges and responses among member states on immigration and mobility and the promotion of greater and more effective co-ordination of immigration, employment and social inclusion policies.

Many of the issues identified in the Green Paper on greater solidarity between the generations are being addressed at EU level through the open method of co-ordination. Policies are being developed in the fields of employment, social inclusion, pensions and health and long-term care. The focus should be on achieving the right mix of policies to more effectively meet the needs of individuals moving through the different stages of their lives. If demographic change is to be become an integral part of internal and external policy, comprehensive analysis of such change is required at both national and EU level in each relevant policy area. The life-cycle approach should be used to promote more effective co-ordination of policies to determine the policy mix required to secure the best outcomes in each category. Common indicators to measure progress in achieving these outcomes must also be developed.

While many of the policy areas affected are matters of national competence, the European Commission could adopt as its roles the facilitating of exchanges of information, analysis of demographic change and the encouragement of reforms where they are needed. It is understood that the Commission received approximately 240 contributions from member state governments and a wide range of stakeholders, namely, public authorities, non-governmental organisations, the social partners, academics and individuals. Later this year, it is expected to publish a communication, in the form of a White Paper on demographic change, setting out concrete actions for the future. It has also announced that it plans to establish a European demography forum to continue the debate on this subject.

Ms Anne Vaughan

Members received copies of my presentation entitled, Long-term Demographic Change in Ireland. A number of reports have been compiled on the long-term pressures Ireland will face in the coming years, all of which are based on the most recent population labour force projections from the Central Statistics Office, CSO, covering the period 2006 to 2036. The CSO projections were based on the previous census and will be updated in due course.

The current population forecasts in the CSO projections are significantly higher than in previous estimates due to a number of factors. First, these are the first set of projections in which significant levels of inward migration were assumed in the long term. The particularly high level of immigration — approximately 30,000 per annum — assumed for the period 2002 until 2006 has proved to be a conservative estimate because net immigration last year was estimated to be more than 53,000.

Second, between 1996 and 2002 life expectancy at birth for males and females increased by 2.1 years and 1.7 years, respectively, a significant increase over a short period. The first table in the presentation provides actual and forecasted life expectancy at age 65 years and shows some historical figures to indicate the increase for both men and women. Commissioner Spidla, in the first paragraph of the foreword to the European Union Green Paper, states that there is also a continual rise in life expectancy that is "undoubtedly one of the most important achievements of our model of society". The Department echoes the Commissioner's views and regards the increase in life expectancy as an achievement to be celebrated.

Third, the fertility rate recovered somewhat between 1994 and 2004 and is at a high level relative to most other European Union countries. In 2004, the figure stood at 1.95, which is lower than the population replacement rate of 2.1 but higher than the European Union average rate of approximately 1.5. Current projections assume that while the rate will fall slightly over time, it will remain high relative to other member states. These projections were used in the national pensions review produced by the Pensions Board at the end of last year. Table 2 provides a summary of the key demographic changes based on these assumptions.

Before discussing the figures in detail, I remind members that they are projections. They extend as far as 2056 and, as with all projections, the only certainty is that they will differ from the actual figures. Nevertheless, as the Commission's Green Paper notes, projections are necessary. Pensions, for example, are a long-term issue and the EU requires that Ireland produce projections every five years. The Department believes the actual figures will be of the order of magnitude of the projections.

Table 2 indicates that the working age group will increase before declining and projects an increase in the numbers of older people from a current figure of approximately 11% of the population to approximately 22% of the population in 2036 and approximately 29% of the population in 2056. The other figure frequently cited is the number of people at work compared with the number of people aged 65 years and over. As the table indicates, the ratio of workers to those aged above 65 years, which currently stands at approximately 4.3, will decline. There is much debate about these figures and what they mean and about where productivity comes into play. Whatever way one looks at the figures, however, they show significant increases in the number of older people and there has been a huge increase in the number of individuals over 80. These are the key figures.

Deputy S. Ryan

To what do the three figures refer?

Ms Vaughan

I am sorry, I do not understand the Deputy's question.

Deputy S. Ryan

In regard to the population aged over 80, there are three figures for 2006——

Ms Vaughan

They are the number of people at present. The figures are in thousands. It is currently 110,000 and will increase to 318,000 and on to 573,000.

Deputy S. Ryan

Is that the actual population?

Ms Vaughan

Yes. At present, approximately 110,000 in the population are aged over 80 and this category will increase significantly. While the working and school age populations will not change significantly over the period 2006-56, the older population will increase dramatically due to the combined effects of migration and mortality improvements. In particular, the number of people at work in the labour force per person aged 65 or older is predicted to be a third of its current level and this will obviously have implications for pension financing. The number of people over 80 will increase by five times the current number and this will clearly have implications for health and long-term care systems.

Using some of the figures that emerged from the recent Pensions Board report on the pensions review and the estimated projected pension costs to 2056, as a percentage of GNP, the gross expenditure on both social welfare pensions and on the public service pensions that are paid to public servants is forecast to increase from something of the order of 4.3% at present to approximately 9.8% in 2036 and to almost 14% in 2056. We show the net Exchequer costs by removing PRSI contributions and also the effect of the National Pensions Reserve Fund. What is happening there is that 1% is being paid in and from 2025 payments will start to be made from the reserve fund.

It is not the exact figures that are of interest here, rather it is the orders of magnitude and the direction of the figures. While the burden of these extra costs will be eased somewhat by the National Pensions Reserve Fund, there is still a significant balance of costs that will need to be dealt with through a combination of some people paying higher taxes, longer working lives, higher funding of pensions or lower benefits, which is probably not realistically on the cards.

Deputy S. Ryan

Is that Government policy?

Ms Vaughan

These were the options proposed in the pensions review. The review is saying that there are only really four or five ways of addressing the issue. However, some of these are certainly not on the agenda.

Ireland is already in the position of having a higher than average effective retirement age than most other EU countries. It is currently approximately 62.8 years compared to an EU average of 60.7. However, further improvements may need to be made. The recent abolition of statutory retirement age for new entrants to the public service will improve the longer term position here. The Irish social welfare pension age of 65 or 66 is at the upper end of the scale in terms of other EU member states.

In regard to what Mr. Quirke said, the employment rate for older workers in Ireland is 49.5% compared with an average of 41% in the EU. We have almost reached the EU target of 50%.

I referred to pensions. The ESRI has done some work and produced projected figures for 50 years hence in various areas of public expenditure and we will make these available to the committee. While spending on child benefit and education is in line with the share of children in the overall population, the sums expended on care for the elderly, social welfare, health and long-term care are all predicted to be much higher than the sums expended thereon at present.

Let me give a small plug to the pensions forum, which the Minister and the Pensions Board are holding jointly this Friday and about which members have been notified. It is hoped that the forum will address some of these issues and the options that exist in the pensions area.

Deputy Stanton

I apologise for being late. The train in which I travelled to Dublin was delayed by half an hour.

The document is very interesting, important and quite complex. I read the Green Paper and noted that, as Ms Vaughan stated, we seem to be doing better than other EU states. Our membership of the Union involves economic union among other elements and in this regard the demographic projections for Europe, as set out in the Green Paper, do not look good. Bearing in mind that there is to be a forum later this year in which concrete actions are to be set out, what impact would a downward turn in the European economy have on Ireland, even though it will do fine in the short term?

We obviously have huge costs to bear. We have seen the projected costs for Ireland, but those for our European neighbours must be astronomical in light of the fact that they also have lower retirement ages and that most of their birth rates are lower than ours. I was also struck by the fact that the birth rate among the new entrants to the Union seems to be lower than the European average. What impact will this problem have on Europe if it is not rectified in some way?

The reasons for the low fertility rate, outlined on page 5 of the Green Paper, include late access to employment, job instability and expensive housing. We probably have the highest house prices in Europe. Many of the houses being built do not seem to be conducive to family life in that they have insufficient floor space. They are in high density complexes and have no space around them in which children can play. In many instances, they are dormitory units rather than houses. Has anyone considered this?

The lack of incentives was mentioned. Page 7 of the report states that young people are at particular risk of poverty, which is something members have heard on many occasions. Amazingly, the report states that the Union must accept that young people are becoming a rare but undervalued resource in Europe and that they find it difficult to integrate into economic life. I am not sure if this holds true in Ireland? Will the delegates comment on it?

The report also maintains that the skills learned at school are not always in line with the requirements of the knowledge society and that the level of school failure is still a source of concern. Is that the position in Ireland? Other committees have examined the matter.

On the issue of children being at risk of poverty, I attended the forum on lone parenting held by the Minister last week. The report states that the risk of child poverty is even worse among children of single-parent families. What impact will this trend have?

The report also refers to the need for a better balance between family and working life. We hear stories about people travelling long distances from the commuter belt to their places of work, thereby spending hours in their cars each morning and evening. This must have an impact on people's decision to have children and it will continue to do so unless action is taken.

On the other hand, people are living longer and high intensity care will be concentrated towards the end-of-life period. I am struck that the numbers of those aged 65 and over and the "very old people", as defined in the document, aged 80 or over, are increasing, which will entail high costs. That more women are in employment and more adult children live far away from their parents will also have an impact.

There is a great deal happening which we, as policy-makers, must take on board. I welcome the fact that we are discussing this matter but we need to take it seriously. The document raises many other issues such as the reasons for these developments and their subsequent impact.

Mr. Quirke

The Deputy is correct to state that the demographic changes have major implications across a range of policy areas, not only pensions and long-term care but also unemployment and family policy in respect of incentives for people to have more children. The main implication is for the prosperity of Europe and the living standards of its citizens. The annual rate of potential growth in GDP is expected to fall from 2.25% today to 1.5% in ten years' time. There will be no growth in many large member states, which will have knock-on effects on the Irish economy in terms of exports, etc.

A sizeable percentage of young people is at risk of poverty. Youth unemployment is a serious issue in many member states. The EU average is running at approximately 14%, which is almost double the overall EU unemployment average. At the March Council, the Heads of State agreed on a youth initiative for the entire Union. This will involve training young people and giving them opportunities to enter the labour market. The attempt to draw up a youth employment policy caused difficulties in France.

The number of those aged over 80 years is expected to increase from 18 million to 34 million, which will exert pressure on the financing requirements for health and long-term care. It will also give the new member states the opportunity to encourage more people to work well beyond the age of retirement by providing them with a range of incentives through earning additional pensions.

Deputy S. Ryan

This is an interesting report and it outlines the extent of the problems to be faced in the future. One can see from the figures that the birth rate has been in decline for the past 30 years. What has been done about this at Government and EU level? The issue should have been addressed before now. The lack of action has left us in a situation where significant changes must be brought about in how we cope with the financial implications of demographic change and the effect it will have on our economy and people's lifestyles. Many individuals do not realise the impact it will have on future growth.

Major initiatives must be undertaken by other Departments. Although the issue has implications for the Department of Social and Family Affairs, it also has implications for the Departments of Finance, Health and Children, and Enterprise, Trade and Employment. These Departments will be obliged to make important decisions on the issue. What co-ordinated approach is taking place at Government planning level to deal with this issue? I have seen no evidence that any approach is being taken. What action have the Government and the EU taken?

The delegation referred to encouraging people to work beyond 65 years of age. What consideration has the Department of Social and Family Affairs given to the implications for people who wish to work on after 65 years of age? Organisations representing older people will state that they have nothing against older people remaining in the workplace if they feel that they have a contribution to make to it. However, these organisations — I share their view in this regard — would be totally opposed to a mandatory requirement for people to work beyond 65. What analysis has been carried out and what discussions have taken place in respect of this matter at within the Department?

Most older people are cared for in their home environment. Some 5% of older people, however, require long-term institutional care. Fewer long-term care facilities are being made available. This, along with the demographic changes described, will involve serious implications for Government policy as to how to care for older people.

The committee has been presented with an interesting and important contribution. Much of the Government's attention will be paid to this area in the future. It seems we have lost an opportunity and concentrated on other areas rather than examine this important area for the future. We have lost time but we have a lot of work to do in the future.

Mr. Quirke

Deputy Sean Ryan referred to the co-ordinated approach. What such approach is in place at EU and national level?

Deputy S. Ryan

At EU level it could well be seen as just a talking shop. For us, the real action needs to be here.

Mr. Quirke

At EU level, member states are required to take real action and report on it. For example, the employment strategy covers a range of areas and relates not only to targets in terms of the percentage of the working age population, such as the 70% target rate or the 50% target rate for all workers. Member states must make progress on other aspects of employment policy.

Deputy S. Ryan

When Mr. Quirke refers to older people, to what age group is he referring?

Mr. Quirke

People aged 55 to 65.

Deputy S. Ryan

People can currently work until 65.

Mr. Quirke

Yes, but the current proportion of older workers in the EU labour force as a whole is only 40%. Member states are encouraged to get that level up to 50%, to ensure older workers remain in the labour force as long as possible. This will stimulate economic growth and help people to have better pensions.

Deputy S. Ryan

Of that 40%, how many are male and how many are female?

Mr. Quirke

We have not got that figure. All member states must draw up national action plans to outline how they will achieve their targets between now and 2010. They must also outline the action they are taking with regard to reconciling work and family life and what they are doing in terms of reorganising working time. All these issues are part of a strategy. Action is being taken at EU level and member states must make and report on progress. At the end of the day they are examined by the Commission and by the other member states. A peer review process takes place between member states to see how countries are tackling the issue and what measures work best and member states can learn from each other. In the past five years, the Scandinavian countries are doing the best, not just in terms of employment targets but in terms of having the best child care facilities, elder care facilities and so on. While they have a high level of female participation in the labour force, they have a fertility rate above the EU average. There is something working in the Scandinavian model from which member states can learn.

Action is being taken at EU level, but the Green Paper goes on to focus on other policy areas such as care for the elderly and family policy, which hitherto have not been examined. The areas examined to date are employment policy, economic policy, pensions and social inclusion. The debate has been broadened to include all these areas because of demographic change. The purpose of the Green Paper is to see how we can have a co-ordinated approach in all the areas involved.

Ms Vaughan

We were asked about our strategy in terms of pensioners, for example. We are very supportive of people working beyond the age of 65 or 66 where they choose to, and the Minister for Social and Family Affairs has made many public statements on the matter.

Deputy S. Ryan

What is the current situation for those aged 65 and 66?

Ms Vaughan

We pay the retirement pension at age 65, but as the Deputy knows, a person must retire. There is a commitment in the Government programme to remove that retirement stipulation because it seems to be a barrier to people continuing to work.

Deputy S. Ryan

When does Ms Vaughan believe that will be introduced?

Ms Vaughan

There is agreement in principle to that in the Government programme. As a result——

Deputy S. Ryan

There are a few proposals in the Government programme that have not been implemented. That is an important one.

Deputy O’Connor

The Deputy is correct.

Deputy S. Ryan

I am.

Ms Vaughan

It is not a cheap proposal, it would cost in the order of €16 million per annum. If it was not so significant it would have been implemented already. The commitment exists and it is something the Minister recognises as an issue.

The Minister is on record as accepting proposals to allow people at age 65 or 66 — the age at which the old age contributory pension is paid, and there is no requirement to retire — to postpone their pensions and have them paid at an actuarially higher level at a date decided by them. That is something we are agreed in principle to do. It is now a matter of deciding when it will be operationally feasible. We will probably need to have discussions on this with pensioner groups so that everybody is clear on the details of the proposal.

In the recent Social Welfare and Pensions Act the titles of the schemes were renamed and we now have the State pension, contributory and non-contributory. That was done deliberately to get away from terms such as "old age retirement". This trend is not a full stop but rather a continuum. There are no proposals to increase the pension age, but this is obviously something on which there is ongoing debate. As I said, Ireland is at the higher end of the league for European countries in that regard. That is the position on the pensions side.

On long-term care, as stated, 45% of people are in long-stay nursing homes, whether private or public. Again, there has been much discussion about commitments to increase community care and we recently held bilateral meetings with the social partners on this question. That is the commitment. It is an extremely difficult area. The over-80s figure is not enormous, but it will increase significantly. All the issues to which Mr. Quirke and I referred as regards fewer people being available to care will be in line with this trend. However, both the Tánaiste and Minister for Health and Children, Deputy Harney, and my own Minister, are working together on this. There is a report before Government on the whole area of long-term care. There was a significant increase in expenditure from the Department of Health and Children just before the budget. The committee may be aware that the HSE propose to roll out an additional 2,000 home care packages on a pilot basis this year. A twofold effect is anticipated. More people will be enabled to remain in their own homes thus reducing the need to go to hospital and those who, with proper backup and care, are in a position to come out of hospital and return to their homes will be assisted. Some 2,000 packages have started to be rolled out. The important issue here is that they will be monitored to determine best practice. If the home care package is to be flexible much will depend on the needs assessment of the person who is in need of care and where applicable the needs of the carer. Obviously, there may not always be a carer involved. That is an indication of the strategy in the long-term care area.

Senator Terry

The delegation is very welcome and I thank the speakers for the presentations. This issue is of significant interest to the committee. We are aware of the changing demographics in Ireland and throughout Europe, particularly in regard to the aging population, falling birth rate and associated problems. We must consider what we can do in this regard. Our aging population is healthier than previous generations which will, hopefully, lead to many older people staying on at work, as was mentioned. This must be facilitated in order that those who wish to can work for longer and perhaps defer taking their retirement pensions.

The falling birth rate is a concern but we have not focused on it. Instead, as Mr. Quirke noted, we have focused on employment policy in recent years, particularly on increasing the participation of women in the workforce, with which I agree for those women who wish to return to work. I agree we have focused too much on getting people back to work while we have not put in place the structures to enable them to do so. Until we do that, we will not achieve the participation rates we need and will be obliged to achieve. Issues with regard to child care and flexibility of working hours and types of jobs need to be progressed further. We need to include employers and update State legislation wherever necessary to facilitate the participation of more people in the workplace.

It does not need to be a priority that everybody should be in the workplace because, if people are forced into the workplace, it is obvious the birth rate will drop. We need to accommodate women and couples to raise their families and not be under pressure to return to work if they think it is best for them and their children to stay at home. We should be talking more about paid parental leave, particularly for the parents of children under five. I accept improvements have been made in recent years but we need to do much more if we are to achieve what the Scandinavian countries have achieved. They facilitated families to bring about a better balance between work and family life.

The same point relates to elder care for those who can no longer work. How we will look after the elderly is a major problem and one which the Minister for Health and Children is examining, but much more work needs to be done in this regard. I do not want a society where the elderly will be cared for only in nursing homes or hospitals for the elderly. We should consider what is the best type of care. I believe care in the home is best, with the older person being cared for by his or her family. How are we to achieve this? At present we are falling well short of what is necessary.

I wish to mention another aspect, namely, falling numbers in the workplace and the question of how the country will cater for pensions for the elderly in the future. We must make certain that young people, or children, who will be the workers of the future are equipped with the tools to ensure that their productivity and our country's competitiveness will work to the utmost. Hence, we must examine our education system and ensure that all young people receive an education and that none are left behind. The building blocks that must be put in place now to ensure that the country will work to its utmost in the coming years are remaining competitive, maintaining productivity and developing an improved infrastructure.

I will direct my next question to Ms Vaughan. When pension provisions are discussed, one tends to consider the number of people who enjoy occupational pension schemes. However, many people who own property are not counted as making provision for their pensions. If one asks anyone who has bought a second or third property or whatever why he or she has done so, he or she will reply that it was for pension purposes. Has Ms Vaughan any statistics regarding the numbers of workers who have bought second or additional properties? The figures available previously are not accurate and the property market is quite distorted in that, in many new developments, 40% of the properties are bought by investors. Hence, while such people are engaged in making provision for their pensions, this is not reflected in any of the available statistics and that matter must be addressed.

While the future looks fraught with difficulties when presented in the manner employed by the witnesses, one must also consider the current position. When compared to some years ago, the country and many people are better off and we have the means to look after our older folk. While figures show that matters will not remain as they stand, the issue is similar to asking how a child will be able to look after itself in the future. One gives such a child the tools to ensure that it can look after itself. Moreover, the child then will be able to look after the older people as well.

We must examine the social inclusion measures much more closely and develop such areas much better than has been the case heretofore. While we are playing catch-up when compared to the Scandinavian countries, we know what must be done. We simply must do it.

Deputy O’Connor

I wish to be associated with the welcome extended to the witnesses. I apologise that, due to other business, I was obliged to listen to some of the earlier contributions on my monitor.

Whatever else it might be, the discussion on this matter is thought-provoking. My colleagues articulated a number of issues relating to forward planning and what will happen in the future. I believe Deputy Stanton referred to the Minister's lone parents' forum last week which aimed to support lone parents and which was attended by a number of us. The forum, at which a conditional welcome for the Minister's proposals was given, was thought-provoking. Some of the publicity surrounding comments made at the forum focused on the challenge of change. Change is always a challenge and something about which we are all wary.

Senator Terry made a very interesting point about our current position and our position in the past. I sometimes admit to being from a bygone era in Dublin and sometimes think about those days and where we are now. I often wonder how my parents and my grandparents, in particular, might respond to today's climate. I am sure they would probably be slightly confused, as we are sometimes. Times were different then and those of us who can reflect this and contrast it with today's climate find it very interesting.

Ms Vaughan spoke about the new titles of various aid programmes. It is akin to the old story about the woman in County Kerry who apparently said she was not particularly interested in euro coins and preferred to keep the old currency. There is always a touch of this in people's reactions to change.

Deputy S. Ryan

I thought this story concerned Tallaght.

Deputy O’Connor

I think the story concerned County Kerry. Certain people in Tallaght also remember the old days. A point I made to the Minister concerned the constant need for the Department, which is so successful in many ways, to understand its responsibilities in respect of communication. Those of us who need to contact Departments about various issues relating to our constituents always say that the Department of Social and Family Affairs is much more responsive and deals with information in a more efficient way than many other Departments. I do not think my colleagues would disagree. However, communicating information about change and new programmes always presents challenges.

I agree with the point made by Deputy Seán Ryan about retirement age, which has been the subject of much debate. I recently intervened on behalf of a 65-year-old constituent who is very fit but who could not continue employment as a FÁS supervisor beyond the age of 65. Although I am a Government backbencher, I am not afraid to say that this aspect of Government policy should be addressed. There will always be people who, for various reasons, do not wish to work beyond 65. I am visited by people who wish to retire at a much earlier age, however, many people do not wish to retire at this stage of their lives. Someone told me recently they noticed that people do not live long after retirement. This observation might be inaccurate but people have often commented that people are better off working and I hope to work on, regardless of the area in which I find myself. I hope Mr. Quirke takes note of the question of how the system should deal with people who wish to work beyond 65. As Ms Vaughan noted, the issue is the subject of much debate. Many people are discussing pensions and how to plan for the future.

My Opposition colleagues have already made the point about how well the country is doing so there is no need for a Government backbencher to repeat it. However, the country's wealth presents its own challenges, such as the question of whether this growth can be sustained, whether the level of employment the country is experiencing can be maintained and whether people will continue to have sufficient disposable income to ensure their retirement is comfortable. All these points are relevant in a discussion such as this.

I will address both the future difficulties presented by a booming economy and the future of community care. Deputy Ryan has reminded me that I live in Tallaght where, like everywhere else, community care services are under a lot of pressure. That is not a surprise, as Tallaght is the third largest population centre in the country. However, it brings home the fact that such services are under a lot of pressure. In discussions in the Dáil every week we talk about the need for more resources, home helps, nursing home places for the elderly and systems that would allow people to stay at home. This discussion paper brings up many of these points. As it touches upon my final point, I will choose my words carefully.

There are particular challenges in respect of what the INTO describes as "newcomer communities" or I sometimes refer to as "international communities". A point is often made about the difference between social welfare payments for one section of the community and another. I will be careful in what I say because I am sensitive to the issue. This point crops up on the doorstep. Does the Department have an opinion on the matter? I am sure it has heard of the many payments and assistance that some members of the community can be accused of receiving from it. Often this is a long way from the truth but, at the same time, the point is made in all of our communities. As reference is made in the discussion paper to controlled immigration, it is fair to ask the question.

I wish the Department well. This presentation is of significant interest and thought provoking. In 20 or 30 years' time people will hope the Houses of the Oireachtas will have spent much time on forward planning to meet the challenges we will face.

Mr. Quirke

On the points raised by Senator Terry, I agree wholeheartedly that the focus should not just be on increasing employment rates, particularly female employment rates. While this might have been the European Commission's position in recent years, the focus is now on encouraging member states to introduce further policy measures to allow people achieve a work-life balance in order that they can reconcile their work and family commitments through better child care services, better paid parental leave and more flexible working arrangements. This focus is reflected in the employment guidelines published last year and agreed by all member states in that more measures must be taken to improve the reconciliation of work and family commitments. A balance must be struck.

Deputy O'Connor referred to the social welfare entitlements of various categories and the criticism in respect of certain individuals within society who claim them. Every person has a legal entitlement to social welfare payments. Last year the Department introduced a new condition in respect of migrant workers and immigrants from the new member states governing entitlement to social assistance. This is the habitual residence condition which applies equally to Irish and other EU nationals. Everybody is on a level playing field because this condition must be satisfied. To comply with a requirement under the EU treat, everybody must be treated equally, irrespective of nationality.

Deputy O’Connor

Many of us have received representations from returned missionaries who find the situation to which Mr. Quirke referred challenging. Having been abroad for decades, they return to Ireland to retire or, as was the case with one woman I spoke to recently, to care for an ailing parent. They find the regulations a major challenge and it is difficult to explain the situation to them.

Mr. Quirke

This is a new condition. In the case of a missionary returning to Ireland to retire the person is locating his or her centre of interest in Ireland. He or she should not have any problem, therefore, in satisfying the criteria. We must judge each case on its merits. In other cases the person's centre of interest may not be located in Ireland.

Ms Vaughan

To follow up on the point made by Mr. Quirke, much progress has been made in dealing with personnel of missionary orders. We have met the orders to discuss the outstanding issues. Given the progress made, the problem may be one of communication.

Concerning Senator Terry's point on property, the most recent Pensions Board review does not provide data on people's assets. If one is self-employed, one may consider a business to be the source of a pension. The Department has an arrangement with the Central Statistics Office whereby the CSO undertakes a pension survey on an annual basis. The results are not yet available but we have included a question on where people expect to receive their pension income. The survey does not ask if they own a second property. While one may own a property,one must ensure it produces a stream of income in retirement.

Much emphasis has been placed on being part of a pension scheme or paying PRSI. One should be included in such schemes but one must also make reasonable contributions to benefit in retirement. Senator Terry has strong views on this issue. I accept one must receive a reasonable income from such schemes. We are trying to assess the asset issue but it is not easy.

I hope members have seen advertisements promoting this week as pension action week. An effort has been made by the Pensions Board and the Department of Social and Family Affairs to get people to consider their pension arrangements. There has been much discussion on the matter but we are seeking to get people to take action. The Minister has asked the board to consider a programme of mandatory pensions and expects to receive a report during the year.

I agree with Deputy O'Connor that it is pointless to change names for the sake of it. However, we are trying to signal a change in the attitude of the Department and encourage the public to take a different attitude. The Deputy mentioned that he had attended the lone parent forum and was complimentary about the information made available and the delivery of services in all areas. We try to consult older people and others for whom we have made arrangements and provide services. We consulted older people on the change of name. It is not only a question of our attitude but that of the people themselves and employers. While new public servants do not have a retirement age, they will not all work into their eighties or nineties. It remains to be seen what will happen when they reach those ages. Employers must react to their view of older workers and their benefits. That debate must continue. I do not disagree with Deputy O'Connor. The point he made on community care was similar to the ones raised by his colleagues.

Acting Chairman

If there are no further questions, I thank Ms Vaughan for an informative and helpful briefing. I welcome Ms Joan Gordon from the Department of Social and Family Affairs to discuss COM (2006) 7 and 16, proposals for regulations on the co-ordination of social security systems. She joins Mr. Quirke who will remain before the committee.

Mr. Quirke

I am joined by my departmental colleague, Ms Joan Gordon, and Mr. Eddie O'Reilly from the Department of Health and Children. I thank the committee for giving us the opportunity to outline the position on these two related proposals. Members may already be aware of the EU regulation governing the co-ordination of social security rights within the Union, Regulation 1408/71, which is 35 years in existence. An implementing regulation, Regulation 574/72, to support the main regulation was enacted in 1972. Since 1997 the European Commission has introduced proposals to reform and simplify these regulations. The reform of Regulation 1408/71 was completed during the Irish Presidency in 2004. Regulation 883/2004 was passed by the European Parliament at the end of April 2004. However, a number of annexes to the new regulation were not completed. The first proposal deals with Annex 11 and aims to complete the task of simplifying and modernising Regulation 1408/71. The second sets out the implementing provisions for the new regulation and will replace Regulation 574/72. Regulation 883/2004 cannot come into operation until the implementing provisions are agreed by the European Council and European Parliament.

I will give committee members a short overview of the proposed Annex 11 to Regulation 883/2004. This annex provides for special provisions for the application of the legislation of member states. It is necessary to take into account the particular features of various member states' social security systems and must be determined before the date of application of the regulation. Each member state was asked by the European Commission to submit any proposals required for the application of its own legislation. Following evaluation by the Commission, the proposals were discussed with individual member states. The proposed new Annex 11 corresponds to the existing Annex 6 and both provide for special provisions for the application of national social security systems. However, in line with the general objective of simplification, the new Annex 11 contains fewer entries than the current Annex 6/1408.

Ireland currently has nine entries in Regulation 1408/71 and it is proposed that under the new regulation it will only have two. Both entries have been agreed with the European Commission and are being applied by the Department of Social and Family Affairs in implementing the existing legislation. The first entry relates to the calculation of disability and unemployment benefit for persons who have worked in another member state. A person with reckonable earnings of less than €150 per week qualifies for a graduated rate of unemployment or disability benefit. Reckonable earnings, in terms of a claim received in 2006, relate to a relevant contribution in 2004. Where a person works in another member state during the relevant contribution year, the Department credits that person with a notional earnings amount for each week of social insurance or employment in that member state. The amount is equivalent to the average weekly earnings in that year for male and female workers. The crediting of notional earnings ensures the claimant will have an entitlement to the standard rate of payment rather than the lower graduated payment.

One of the provisions of Regulation 883/2004 requires that, in those cases where a person works in another member state, the social security institution must obtain details of the person's earnings from the other member state but this would lead to many delays in calculating earnings. There are delays in obtaining contribution records from other member states and further delays would result from the application of this provision. Ireland has been allowed a derogation whereby it can credit a person with the average earnings of workers in Ireland for each week that he or she has worked abroad. This ensures such a person will qualify for the standard rate of benefit.

Ireland's second entry in the regulation concerns entitlement to invalidity pension. To qualify for invalidity pension a person must be regarded as permanently incapable of work and likely to remain so for a further 12 months. Where a person was insured in another member state and suffered incapacity to work, leading to invalidity, under EU regulations, such period shall be taken into account in determining entitlement to an Irish invalidity pension. However, Ireland seeks to retain its existing derogation to this provision, stipulating that such periods could only be treated as qualifying periods if the person concerned would be regarded as permanently incapable of work in Ireland. The need for this entry in the annex arises because in some European member states a person can become entitled to invalidity pension, even though he or she may not necessarily be regarded as permanently incapable of work. If a person received disability assistance from the Department in the past 12 months, he or she will be regarded as being incapable of work for at least 12 months. Equally, if a person had been in receipt of a similar payment from any other member state, he or she would be regarded as being incapable of work for at least 12 months, provided the payment was not made in respect of partial incapacity.

Member states have various types of invalidity pensions systems and some pay on the basis of partial incapacity, whereas only those regarded as permanently incapable of work qualify under our system. In cases where a worker was employed in another member state, we are obliged to take account of periods of incapacity in that state. However, we have stipulated in this derogation that the period of incapacity must fulfil the conditions laid down in Irish legislation and these require that the person must be permanently incapable of work during the qualifying period and not merely partially incapacitated.

The other seven entries have not been reproduced in Annex 11 because they are no longer necessary due to changes in the legislation or provisions made for them in the new legislation. This proposal is currently being debated in the European Council and we do not anticipate any difficulties during its negotiation. The latter will, however, take some time because the individual derogations proposed by each of the 25 member states will have to be examined by the Council and Parliament before they are adopted.

Deputy Stanton

The diversity of national systems within the expanded EU requires a great deal of work to be done in terms of co-ordinating the systems. I am curious to learn more about partial incapacity and the fact that other countries have systems of payment for this but that Ireland does not. Are there any plans to introduce such a system here?

Mr. Quirke noted that much time and effort are required to relay information between Ireland and other countries and stated, "The crediting of notional earnings ensures that the claimant will have an entitlement to the standard rate of payment rather than to the lower, graduated payment." Does this mean that changes will be made if and when the records arrive? Do the latter even have to be sent here? How many people are involved with interactions on invalidity pensions and disability unemployment benefits?

The use of electronic data was mentioned with reference to whether it would result in the payment of direct benefits on migrants' claims. In respect of the verification of claims, how effective are the systems in place? Is Mr. Quirke satisfied that they can prevent bogus claims? Are follow-up checks made to track changes in circumstances? I have been informed that electronic funds transfers, EFTs, have created difficulties in this regard. Under the old method, recipients brought benefits books to post offices and postmasters checked them on an informal basis. However, it is not always possible under the EFT system to locate a person or even to confirm whether he or she is still alive. That issue arises because of the impersonal nature of EFTs.

Mr. Quirke

On the review of the invalidity pension scheme, there are no plans to change the condition whereby a person must be permanently incapable of work. On the second point on how we credit notional earnings, when we receive a claim for disability or unemployment benefit for a person who has worked in another member state, that person must provide details of his or her social insurance status in the other member state — for example, his or her name, reference numbers and employment details. Each social security institution must complete a specific form, which is agreed throughout the EU, and send it back to the requesting institution. Using a common form to secure the information allows each social security institution to have a real check on the data to ensure that it matches the data on its system. We receive approximately 200 disability claims per week. Unemployment claims also number in the hundreds.

Deputy Stanton

Is that new claims each week from people who worked in other countries?

Mr. Quirke

Yes, they are claiming disability or occupational injury benefit from here.

The third point related to EFT and electronic exchange of information. Up to last year, when there were 15 EU member states, 80% or 90% of claims originating in the Department related to people who worked in the UK. Good communication exists between our Department and the UK Department for Work and Pensions, including, in the case of pensions, electronic exchange of information. With the addition of the ten new countries, the Commission has encouraged all member states to move to electronic data transmission rather than rely on paper-based forms. This will speed up the exchange of information across all member states. That is the focus. Some countries are already doing it, while others are behind. The Commission is drawing up plans in order that each member state will move towards greater use of electronic data transmission.

With electronic transactions, there is not the same level of checking as with a pension book where a person goes to the local post office and is possibly known by the postmaster. With EFT, however, the Department undertakes periodic surveys to ascertain whether a person still lives at the same address and pensioners must return the forms. That is one control the Department applies and there may be others.

Deputy S. Ryan

I wish to inquire about the derogation in respect of invalidity pensions. A person might have worked in France, England or another member state and become permanently incapacitated, as defined in that country. If he or she moves to Ireland, he or she will need to be incapacitated for a 12-month period before he or she can claim. Is Mr. Quirke saying that, even though the person benefited from a better arrangement in his or her country of origin, under the terms of this derogation he or she would only be paid according to the inferior terms that obtain in Ireland?

A couple of years ago officials from the Department of Social and Family Affairs came before the committee. The previous Minister for Social and Family Affairs said she would introduce regulations requiring people to work for two years before they were paid benefits. As a result, a group of people did not receive benefits. The Department insisted on adopting that policy but it was found to be illegal. What consultation has taken place to ensure that what is proposed in this instance has the support of the EU and other member states?

Is a person who moves to Ireland from England or another EU country entitled to a social welfare payment from the day he or she arrives in the State? Does the same apply to an Irish person who goes to England? Will that person be entitled to child benefit and other benefits or is there a similar waiting period of three or four months?

Mr. Quirke

I will answer the last question first. A distinction must be made between social insurance benefits and family benefits, on the one hand, and social assistance payments, on the other. EU Regulation 1408/71 and the new Regulation 883/2004 deal with social insurance benefits and family benefits. Where a person leaves Ireland for the UK to work, the EU regulations governing family benefits take effect.

Deputy S. Ryan

From day one.

Mr. Quirke

From day one. The general rule is that the country where the person is employed is responsible for paying the family benefits. If that person's family resides in Dublin while he is working in, for example, Liverpool, he is entitled to UK family benefits. However, if the Irish level of family benefits is greater than that which obtains in the UK, we will make up the difference. We always ensure that a person is not worse off. Social assistance requires a habitual residence test, which was introduced on 1 May 2004. The test also applies to family benefits, but only for people outside the EU. The EU regulations override national legislation. Taking the example, to which the Deputy referred, of a person going to England, such an individual would not need to satisfy the habitual residence requirement for child benefit. EU regulations override that and the person in question would have an entitlement under EU regulations. That would be that, irrespective of the habitual residence condition.

The legislation relating to the habitual residence condition contains a presumption clause. A person is presumed not to be habitually resident if he or she resides within the State for less than two years. That is a presumption made by the Department. In applying the condition, the Department uses a range of factors. It would examine the length of time a person has been in Ireland, his or her employment prospects and his or her centre of interest. We consider a number of other factors when determining each case.

We do not really apply the two-year presumption clause. We ignore it and apply a range of factors set down by the European Court of Justice in a number of cases brought before it relating to habitual residence in other member states. The issue and our application of the condition was raised by the European Commission. We explained the basis on which we applied the condition and that it related to five factors set down in case law.

The Deputy's other point related to invalidity. The derogation has existed for the past 30 years. It requires that where a person has been in another member state and was incapacitated and receiving benefits there, we will only deal with those periods if the person fulfils the same conditions that we have under our scheme. The person must have been permanently incapable of work. Some member states are very generous with invalidity and early retirement schemes.

Deputy S. Ryan

Will the people lose out?

Mr. Quirke

They will lose out. We wish to ensure that a person who has worked in another member state is treated the same as an individual who has worked in Ireland. We should not treat people coming from the EU more favourably than those who spent the entire period working in Ireland.

Deputy S. Ryan

I made the point when Mr. Quirke was here before regarding situations where everything is above board, but it is proved to be otherwise.

Mr. Quirke

It was a presumption clause. It was not a strict rule.

Acting Chairman

Are there any other questions? If not, I thank the officials for attending and for giving us a worthwhile——

Deputy S. Ryan

There is something more.

Acting Chairman

I thought the Deputy had concluded.

Mr. Quirke

The second regulation lays down the procedures for implementing the provisions of EU Regulation No. 883/2004. The aim of the proposal is to define the procedures needed to implement the principles of that regulation and reduce the time needed for institutions in the various branches of social security — including sickness, unemployment or family benefits or pensions — to process cross-border claims.

Deputies will be aware of some examples. In the case of old age pensions, where a person has worked in more than one member state or is living in a state in which he or she has never worked, it is necessary to specify the steps the person must take in order to apply for payment of the pension. It is also necessary to specify the social security institutions to which the claim should be submitted. Similarly it is necessary to specify the steps that the social security institutions must take and how they should exchange information to ensure that the person's full career is taken into account——

Deputy S. Ryan

Does Mr. Quirke have reading notes on those points? It is the second entry.

Mr. Quirke

——and how each institution will calculate the pension to be paid for the relevant period. In the area of unemployment benefit, for example, where a person decides to go to another member state to look for work, he or she makes benefit to that state for a number of months.

The implementing regulation specifies the steps the person must take in order to avail of this option. Equally, the procedures to be followed by the social security institutions are also specified. The significance of the proposal arises in ensuring that these implementing provisions, which are largely consistent with current procedures but which place greater reliance on electronic exchange of data, will be in place so that people who are covered by the new regulation can avail of their entitlements. The proposal will also ensure that the procedures for calculating reimbursement for services, such as health services and unemployment benefit, provided by one member state on behalf of another will also be in place. This regulation sets down the procedures that must be followed in dealing with claims under the EU regulations.

Acting Chairman

If there are no further questions, I will bring this part of the meeting to a conclusion. I thank the delegation for its informative presentation and I thank members for their contributions.

The joint committee went into private session at 4. 50 p.m. and adjourned at 5 p.m. sine die.