I move :
That Seanad Éireann approves the following Order in draft:—
Redundancy Payments (Weekly Payments and Lump Sum) Order, 1974,
a copy of which Order in draft was laid before Seanad Éireann on 11th March, 1974.
Redundancy Payments (Weekly Payments and Lump Sum) Order, 1974: Motion.
I move that Seanad Éireann approve the Redundancy Payments (Weekly Payments and Lump Sum) Order, 1974, draft copies of which have been laid before Seanad Éireann. My authority to make this order, following approval of the draft by each House, is contained in sections 19 (3) and 30 (3) of that Act.
The order I am putting before the House contains three proposals. The first of these provides for an extension of weekly payments in the case of older workers and the second and third are relevant to certain provisions in the Social Welfare Act, 1973, and the Social Welfare (Pay-Related Benefit) Act, 1973.
My first proposal deals with the case of workers who become redundant after the age of 51 years. Many of those have given long service to the same employer and they often find it more difficult to obtain new employment than a younger person whom employers might regard as more adaptable, more easily trained and even less susceptible to illness. To these practical difficulties may be added the adverse psychological effects of redundancy on the morale of the somewhat older worker. In order to help these workers I propose, as from 1st April, 1974, to extend the duration of weekly payments by adding one extra weekly payment for each year of service over the age of 51 years. From that date a redundant worker will receive one weekly payment for each year of service between the ages of 16 and 41 years, two weekly payments for each year of service between the ages of 41 and 51 years and three weekly payments for each year of service after the age of 51 years. I estimate that this improvement will increase the overall cost of weekly payments by about 8 per cent.
Senators will appreciate of course that these payments are made from the Redundancy Fund, which is sustained by statutory contributions from employers and workers.
My second proposal contained in this Order arises from the forthcoming operation of the Social Welfare (Pay-Related Benefit) Act, 1973. Under the present arrangements a redundant worker is paid weekly payments from the Redundancy Fund equivalent to 50 per cent of his preredundancy pay, the length of such payments depending on his length of service. These weekly payments are made in addition to unemployment benefit or other social welfare benefits. The law provides however that the total of all such payments must not exceed 90 per cent of the worker's pre-redundancy pay, and the weekly redundancy payment element is reduced where necessary in order to keep the overall total payment within the 90 per cent limit. As from 6th April next a weekly pay-related supplement will be paid by the Department of Social Welfare in addition to unemployment benefit. In these circumstances the retention of the limit of total weekly payments from all sources to 90 per cent of preredundancy pay would in many cases further decrease the redundancy element, especially in the case of lower paid workers with many dependants. As a counterbalance to this I propose to abolish the 90 per cent limit and to substitute a 100 per cent limit.
Senators will appreciate that this proposal, in conjunction with the new Social Welfare Pay-Related Scheme, will take us into entirely new territory and I cannot at present estimate accurately what increased cost, if indeed any at all, will fall on the Redundancy Fund over, say, the next 12 months.
My third proposal arises from the effects of an order under section 12 of the Social Welfare Act, 1973, abolishing the £1,600 a year income limit for insurability for non-manual workers as from 1st April. The basic situation is that the persons eligible for redundancy payments are those who are insured for all benefits under the Social Welfare Acts. This means that the abolition of the non-manual income limit for social welfare purposes will bring into the Redundancy Payments Scheme a large number of persons hitherto outside the scope of the scheme. The figure is estimated at around 35,000. Many of these will be higher paid workers, possibly with long service, who will only now start to contribute to the Redundancy Fund, the rate being 3p a week for men and 2p a week for women.
The contribution is a flat rate one irrespective of income and the persons in question will be in benefit immediately they start contributing. It could happen therefore that numbers of higher paid workers, if they become redundant, would cause a heavy drain on the Redundancy Fund by reason of their entitlement to large redundancy payments following very modest or almost token contributions to the fund.
It is relevant to mention here that early last year it was necessary to borrow £295,000 from the Exchequer to keep the fund solvent. I am glad to be able to say that this loan has been repaid as a result of increased contribution rates introduced last July and a downward trend in the number of redundancies in 1973—namely 7,504 in 1973 as compared with 10,159 in 1972 and 8,556 in 1971. Accordingly I am proposing that that part of a worker's income exceeding £2,500 a year should be disregarded in calculating redundancy entitlements as from next April. This cut-off point of £2,500 a year is the same as the ceiling set for benefits under the Social Welfare Pay-Related Scheme.
I recommend the resolution approving the proposed order to the House.
These three proposals are welcomed by this side of the House. The first one deals with redundant workers over 51 years of age, rightly giving the extra concession of a week's pay after 51 in addition to the existing weekly payments for which they become eligible in respect of earlier years. I note however that the improvements will increase the overall cost of weekly payments by about 8 per cent; that is coming back to the point I will be making shortly.
The second proposal is welcomed also. Of course, this arises out of the pay-related scheme as the Minister has stated. We are entering new territory here. A lot will depend on how it will develop in the future. The effect of it is to make the overall income from these various State and contributory sources less dependent on the redundancy element than heretofore. Because of this the Parliamentary Secretary has been enabled to raise the 90 per cent level to 100 per cent. I take it this is what is meant in his statement. If that can be done well and good.
The third proposal is a welcome one but again must be balanced against the strength of the Redundancy Fund itself. I always thought that the non-manual income limit should have been abolished. These people are higher paid workers who tend not to go into redundancy to the same degree. I note it was necessary to borrow from the Exchequer to keep the fund solvent, but this has been repaid as a result of increased contribution rates. I could never see any risk in a large section of higher paid workers becoming redundant and so causing a drain on the fund. It has not happened as yet and, I think, is not likely to happen. I am glad also that in the final proposal, the cut-off point exceeding £2,500 per year should be disregarded in calculating redundancy entitlements as from next April. This is the same as the ceiling set for benefits under the Social Welfare Pay-Related Scheme.
I would mention one cautionary matter only. I am sure the Parliamentary Secretary and his Department have it under control. It is the question of the viability of the fund itself. All of these three welcome improvements are related to the viability of the fund and related primarily to the balancing of the Pay-Related Scheme vis-à-vis the redundancy payments. In the Parliamentary Secretary's estimation the resultant overall income to the redundant person is at the moment less dependent on the actual fund itself. Because of the lowering of demand by reason of the pay-related scheme and the increased income from the influx of the non-manual workers, the Parliamentary Secretary foresees that these improvements can be made. However, it is new territory, particularly in regard to the operation of the pay-related scheme. The improvements are welcome. There is no question about that. I am all for the fund being stretched as long as it is not stretched too far.
I am sure the Parliamentary Secretary and his Department are fully aware of the dangers involved in this. It shows the importance of being enabled to operate by way of order in regard to changes in the redundancy payments scheme. It means that improvements can be introduced in this manner without having to go through legislation. Similarly, if there was any danger to the fund I take it similar action could be taken by way of order in the same manner. It is important that we make desirable social change within reasonable financial responsibility; that we can make desirable social change in this manner and effect improvements, where they can be effected, in a quick and expeditious manner.
Lawyers often criticise the procedure of effecting improvements by regulation rather than by legislation. This is an example where it is better to have a system of flexible regulation within the overall scheme rather than legislation, because improvements are necessary where it is assessed actuarily by departmental experts that they can be made without any dimunition of financial responsibility. It is important that these improvements be effected because they affect people who need the money when affected with the trauma of redundancy. Where it can be done I think it is proper that it be done in an expeditious manner such as this— by way of order, without going through the whole process of legislation. I am sure the Parliamentary Secretary and his Department are fully aware at the same time of the need, in effecting such improvements, not to go into a situation of financial irresponsibility and not to have the fund go to the wall. For the reasons I have mentioned, there appears to be no danger of that but at the same time I should be glad to know that if there was such a danger the Parliamentary Secretary could act equally expeditiously by way of order to safeguard the fund.
I endorse this further step forward in the field of redundancy payments legislation. However what pleases me most about this development is the indication given by the Parliamentary Secretary that the number of redundancies has fallen considerably in recent times. He said that the figure for 1973 was 7,504 compared with 10,159 in 1972. I am pleased to hear this and I hope this trend will continue. While improvements in schemes of this kind are always welcome and appreciated, it is far better to attempt to eliminate the circumstances in which this kind of benefit is necessary. The more the redundancies are kept down the more will be available in the fund to help those who unfortunately become redundant.
There is one matter I would ask the Parliamentary Secretary to bear in mind. I also welcome the raising of the limit to £2,500, but it will not have the desired effect unless the limit and indeed the benefits under this scheme and the benefits under all social welfare schemes are increased in accordance with fluctuations in the consumer price index. The figures published only yesterday indicate that there has been an increase of more than 13 per cent in the consumer price index during the past year. All the experts say that the increase in the current year will be in the region of from 15 per cent to 20 per cent. If it is 20 per cent then obviously the limitation of £2,500 would have to be raised by one-fifth. I would ask the Parliamentary Secretary to bear this principle in mind in respect of all social welfare and redundancy benefits. Obviously, even if benefits are adequate at any given time, there is such a rate of inflation in this country and unfortunately throughout the world that the benefits are soon wiped away by increases in the cost of living. This is very important, especially for those who are on fixed incomes and those who are in receipt of fixed pensions.
If the present rate of inflation continues, as unfortunately seems likely, it means in effect that there is a complete turn-over in four years, averaging about 22 or 23 per cent increase on an annual basis. This means that if an individual goes on pension at £15 per week in the course of four years this could be reduced in real terms to £7.50p. This is important because it is affecting the whole economy in the sense that many workers I know will not retire from their employment because they fear that in a short time their pensions, even though adequate at the moment, will be reduced considerably by inflation. I hope I have not departed from the subject but I wanted to ask the Parliamentary Secretary to bear this principle in mind in future legislation related not only to this subject but to all social welfare benefits. I should like to repeat that I and my colleagues welcome this Bill very much.
I thank the Seanad for its reception of the motion and for the contributions made by Senators Lenihan and Kennedy. Both Senators raised a few points on which I should like to comment. Senator Lenihan in welcoming the Bill voiced some concern with regard to the cost, which the Minister estimated at approximately 8 per cent. I agree to some extent with Senator Lenihan but, as he said, it is new territory we are entering and the Minister, I am sure, would be prepared after some period of operation of the present proposals, which will bring a considerable number of new people into the scheme, to review the scheme.
Senator Lenihan also mentioned the question of higher paid workers coming into the scheme and the likelihood of them being less a burden and less susceptible to redundancy. I do not agree with that observation in so far as higher paid workers, and particularly those who have been in many cases loosely described as executives, have found themselves becoming redundant at a time in their lives when, because of their age and their training in employment, they have found it extremely difficult to find alternative employment. This extension of the scheme could be of considerable benefit to this category of workers and their families. If the scheme is seen to be operating successfully and in a healthy financial state, the Minister would not be averse to reviewing the whole situation with regard to costings and benefits.
Senator Kennedy raised some extremely interesting points in his contribution and I should like to thank him. He mentioned, in welcoming the scheme, the ceiling of £2,500. This, I am sure the Senator will accept, is also a necessary precaution to take in the introduction of a new scheme which brings in a considerable number of new categories of workers. It would be unwise, not alone from the Minister's point of view but from the point of view of the people more directly concerned—the general workers who contribute to the scheme —not to take this precaution at this stage in order to ensure that the fund will be maintained and again realising that it would be open to the Minister after a period of operation to review the operation of the scheme, including the ceiling of £2,500.
Senator Kennedy raised some other matters with regard to the whole operation of social welfare benefits, in particular the question of workers' pensions. I think this is a very important point. I should like to assure the Senator, and, indeed, the House, that it is not one that is being overlooked by the Department.
As the House will realise, since the present Government took office, there have been definite advances in this field—the abolition of the £1,600 limit and the introduction of the pay-related benefits. Undoubtedly an area that needs close examination is that of pay-related pensions. I can assure the Senator and the House that this examination is being undertaken at the moment. I do not think there was any other matter raised with which I should deal.
Question put and agreed to.