I am very happy to be introducing this Bill which not only provides for the social welfare increases announced in the budget but also contains other major improvements in the social welfare system. The Bill is in fact the most comprehensive price of social welfare legislation since the early seventies.
The most fundamental change which is being provided for is the extension of social insurance to the self-employed. This is the first time since 1974 that social insurance cover has been extended and this extension will bring within the system 20 per cent of the workforce who up to now have been excluded.
The general increase in social welfare payments confirms the Government's commitment to improving the incomes of the less well-off in our society. In addition, however, the Bill provides for additional increases for those on the lowest payments and for a streamlining of rates of child dependant increases. The Bill also provides for a number of other improvements designed to help particular categories of persons in need.
The special concern Fianna Fáil Governments have always had for our older citizens is shown by the introduction of a pre-retirement scheme for the older long term unemployed. There is provision also to deal with the longstanding anomaly in the old age pensions scheme which affected pensioners with gaps in their insurance records as a result of the operation of income limits for social insurance prior to 1974.
Although this morning's newspapers referred to a rate of 1.9 per cent, happily the rate of inflation this year is expected to be 2.5 per cent, and the general increase of 3 per cent in social welfare weekly payments which is provided in this Bill will more than protect the real value of those payments. In addition however, much higher increases are being given to those on the lowest payments, namely unemployment assistance and supplementary welfare allowance.
There are three main improvements in rates. These are: (1) a general increase of 3 per cent in widow's and old age pensions, unemployment and disability benefit and other weekly payments; (2) an 11 per cent increase in the personal rates of unemployment assistance and supplementary welfare allowance and a 6 per cent increase in the rates for their dependent children; and (3) a streamlining of rates for child dependants involving increases for larger families. In future there will be two different rates per scheme. In general there are four at present.
A family with three children in receipt of unemployment benefit will receive an increase of £3.10 per week giving them a new rate of £102.30 per week. A couple on retirement or old age pension will receive an increase of £3 per week giving them a new rate of £99.20 per week. A widow with three children in receipt of a contributory pension will get an increase of £2.80 per week giving her a new rate of £93.30 per week. The cost of this 3 per cent across-the-board increase is £67 million in a full year.
A particular feature of the Bill is the provision being made for special additional increases for people on the lowest social welfare payments where the personal rates are being increased by 11 per cent. The Commission on Social Welfare and others have referred to the low level of certain payments and this is the first time that special attention has been given in this way to people on the lowest levels. The effect of the 11 per cent increase in these cases will be that, for example, the personal long term rate of unemployment assistance in urban areas will now be £42 per week, i.e. an increase of £4.20 per week.
A married couple with three children will get £6.70 extra per week bringing their total to £98.80. Other personal short term and long term rates are being increased pro rata.
At present, there are 36 different rates of increases for child dependants overall and within each scheme there are four different rates. A major step is being taken in this Bill on streamlining these various rates. Instead of four different rates there will be two for each scheme. The new rate for the first two children will be the average of the two rates with the 3 per cent increase applied. All families will receive at least a 3 per cent increase in their rate. The rate for the sixth and subsequent child will be increased to that for the third to fifth child. This will mean very significant increases in the rates for these larger families, at a cost of £3 million in a full year.
I referred to the 11 per cent increase in personal rates of payment for unemployment assistance and supplementary welfare recipients. As far as the child dependant increases of these payments are concerned a 6 per cent increase in the rates for children is being given. This will provide a significant improvement in the position of families on the lowest payments when taken with the 11 per cent increase in personal rates.
For example, a family with two children in receipt of unemployment assistance at the long term urban rate will receive an increase of £6.20 per week. Their present rate of £84.20 per week will, therefore, rise to £90.40 from July next.
A family with six children in receipt of unemployment assistance at the long term urban rate will receive an increase of £9.70 per week, giving a new rate of £124. The total cost of the increases for child dependants is £9.7 million in a full year.
The overall social welfare package of improvements in payments will cost an estimated £44.8 million, including health allowances, this year and some £101 million in a full year.
The earnings ceiling up to which social insurance contributions are payable will be raised from £15,500 to £16,200, with effect from 6 April 1988. There will be a small increase in the employers' occupational injuries fund contribution from 0.43 per cent to 0.5 per cent from 6 April. This is necessary to ensure the solvency of the fund which, under statute, is funded entirely by employers. At the average industrial earnings, the extra cost per year per employee will be about £7.
Section 8 of the Bill provides for an increase from £62 to £66 in the amount of weekly earnings disregarded in calculating the rate of pay-related benefit. This change will affect only new claims from 4 April.
The income limits for family income supplement are being increased in line with the increases in rates of unemployment benefit. Some 5,300 people now avail of the scheme.
One of the commitments in our Programme for National Recovery was that a detailed study would be carried out to identify what adjustments might be necessary to improve the take-up of the scheme. A review is underway and the report is expected shortly. The results of this review will guide the future development of the scheme.
I should mention at this point that arising from points made in the course of the debate on the Bill in the Dáil an amendment has been incorporated which will enable me by regulations, to change the upper limits for entitlement to family income supplement. Under the scheme at present there is a limit of five on the number of children for which the upper limit of income is increased. The Bill will enable the upper limit to be further increased by regulation and when the results of the review of the scheme are available we can consider what changes are warranted.
Section 9 of the Bill provides for powers to make regulations which would allow for a waiving of interest charged on arrears of social insurance contributions. This will facilitate the special incentive scheme announced by the Minister for Finance to encourage taxpayers to bring their tax affairs up to date.
Part III of the Bill provides for the extension from 6 April of social insurance coverage to the self-employed, one of the most significant developments in the social welfare system for many years. Since the Government decided in principle last July to introduce the scheme this year, a lot of work has been done to prepare for its introduction. I want in particular to express my appreciation in this regard of the work done by the National Pensions Board whose report has been of great value to me in preparing my detailed proposals on the scheme.
The need for extending social insurance to the self-employed has been generally accepted for many years. It will give self-employed people the opportunity of acquiring entitlement to non means-tested pensions as of right for old age or widowhood. Secondly, it will bring greater equity into the financing of social welfare as a whole.
The Commission on Social Welfare was of the view that the further development of social welfare in this country would be best pursued by expanding and improving the present system. The extension of social insurance to the self-employed is fully consistent with the Commission's view and in fact involves the implementation of one of their major priority recommendations.
Excluding the self-employed, who comprise over 20 per cent of the workforce, from compulsory social insurance resulted in the majority having to rely on means-tested social assistance. The result of this policy has been inadequate pension cover for this large segment of the workforce and inequity in the financing of social welfare generally.
Section 11 of the Bill contains the main provisions of the new scheme and provides for the insertion of a new chapter into the Social Welfare (Consolidation) Act dealing specifically with self-employed contributors. The persons to be covered by the scheme are defined in terms of their sources of income. Self-employed people generally pay income tax under Schedule D. Schedule D income will now, for the first time, be liable for a PRSI contribution. The contribution will be collected along with income tax and the rules for collection of tax will apply to it. As Senators will know, signficant changes are being made within the tax system for self-employed people designed to make the system more effective, including the introduction of self-assessment. These changes will apply also in the collection of PRSI contributions from the self-employed under Schedule D.
In addition to income under Schedule D, certain income under Schedule E will also be liable for contributions under the new system. The main category of people involved are some 40,000 proprietary directors of companies. They are liable for income tax under Schedule E but they are not employed under a contract of service and so are not covered by the social insurance system. The Bill provides that payments, other than earnings raising from insurable employment, made by way of salary by a company and classified for income tax under Schedule E, will also be liable for contributions under the new scheme.
Income under Schedule D includes earned income, that is, income from a trade, profession or vocation. Schedule D also includes, with Schedule F, unearned income, that is, income from rents and income from investments such as dividends and interest. Unearned income is already subject to the health contribution and to the employment and training levy.
The Government have decided that both the earned and unearned income of self-employed persons will be assessable for PRSI contributions and reckonable income is so defined in section 10 of the Bill. Capital allowances, however, will be deducted in calculating the reckonable income and in effect PRSI contributions will be levied on income as assessed for income tax purposes, as outlined in the Programme for National Recovery.
There are certain types of income, which come within the ambit of Schedule E, other than employee income and which will be excluded by regulation from liability for PRSI contributions under the new scheme. These include social welfare and occupational pensions which it would not be appropriate to subject to PRSI contributions and income from the holding of public office. The position of public office holders is analogous to that of public servants who are subject to limited insurance which does not include cover for contributory old age pension. The Commission on Social Welfare recommended that full social insurance cover should be extended to public servants and the position of office holders would fall to be considered in that context. The National Pensions Board are preparing a report which will cover the position of public servants.
In addition to exempting certain types of income it is also necessary to exclude certain categories of person from the scheme. Section 12 of the Bill lists the categories of persons to be excluded. The main categories of persons excluded are: assisting relatives; persons on unemployment assistance; persons with income below a prescribed amount; employed contributors or occupational pensioners whose only income under Schedule D is unearned income; and certain persons in modified social insurance such as permanent and pensionable public servants.
The Government in their decision in principle to introduce the scheme in July envisaged that assisting relatives would be covered. However, the National Pensions Board concluded that the position of assisting relatives calls for further examination and advised that they should not at this stage be brought within the social insurance system. I have accepted this advice and will consider their position when the board reports on pension coverage generally.
This exclusion will not apply in the case of married couples who are partners and who jointly own and operate a self-employment enterprise. They will each be insured as self-employed in their own right with a contribution payable by each and each having an independent right to pension.
Self-employed persons on low incomes may qualify for unemployment assistance at present. It is not considered that such persons should be covered by and required to contribute to the new scheme. Smallholders on unemployment assistance already come into this category. Those who have previously been insured as employees may be entitled to credited contributions which maintain their entitlement to contributory pensions. Provision will be made in regulations to enable self-employed persons to qualify for credits on similar lines.
In addition to the exclusion of persons on unemployment assistance there will also be a general exclusion for people whose total income is below a certain level. This level will be prescribed in regulations but I envisage that, initially at least, the level will be set at around £2,500 a year which is approximately the rate of the old age non-contributory pension for a single person. There is already under the scheme for employees an exclusion in respect of employment of inconsiderable extent and an exclusion of this kind is also appropriate in the case of self-employed people. The only feasible way to provide for this in their case is by reference to income and I consider that a level of around £2,500 per year is a reasonable one.
Other categories whom it is proposed to exclude from the new scheme are employed persons and occupational pensioners whose only other income is unearned income. Permanent and pensionable public servants are not covered for contributory old age pension at present because they have adequate occupational cover. They may, however, have some additional income from self-employment. They will also be excluded. Otherwise they could, in return for a relatively small additional contribution, acquire entitlement to contributory pension additional to their occupational pension.
Apart from the excepted categories the scheme will be compulsory for all self-employed persons just as the scheme for employees is compulsory. The suggestion has been made that self-employed persons who are in a position to make their own pension arrangements should be free to opt out on the grounds that this would ultimately result in net savings to the Exchequer. In fact, the opposite is more likely to occur. I could not accept an optional scheme of this kind which would run counter to the principle on which social insurance is based. Every pension scheme is based on a mixture of good risks and bad risks and this is particularly the case with social insurance schemes under which coverage is so broadly based.
Moreover, if the persons concerned failed to maintain their pension cover and ended up with no income in old age or if their survivors had no income, the general taxpayer would be required to provide them with a basic means tested payment, but no direct contribution would have been paid by them.
Many persons who are or were voluntary contributors under the present system will now become compulsorily insured under the new system. As voluntary contributors, the persons concerned would have been covered for additional benefits such as retirement pension from age 65, deserted wife's benefit and death grant. It would have been necessary to have provided for three separate voluntary contributions at relatively low rates to enable them to have maintained this cover. This could have resulted in the cost of collecting such contributions exceeding the actual revenue. I am, therefore, making provision in this Bill that any additional benefits for which these persons were insured as voluntary contributors will be maintained under the new arrangements.
Provision is also being made to enable persons who cease to be compulsorily insurable as self-employed contributors to maintain their social insurance cover by the payment of contributions voluntarily. Such persons will be required to pay £208 annually. A flat-rate contribution is necessary in their case as by definition they will not have reckonable income or reckonable emoluments on which an income-related contribution could be levied.
I would now like to outline the benefits to which self-employed contributors will be acquiring entitlement from 6 April. Social insurance cover will be extended to the self-employed for old age and widow's and orphan's pensions. The same contributions conditions which apply at present for entitlement to these pensions in the case of employed persons will apply in the case of self-employed persons. Thus after four years a self-employed man who is married will have acquired for his family an entitlement to the contributory widow's and orphan's pension.
Entitlement to the old age contributory pension will be acquired by self-employed persons after completion of a minimum of ten years insurance before reaching age 66. Periods of insurance completed previously either as employees or on a voluntary basis will be taken into account and may enable the persons concerned to obtain entitlement to pensions earlier.
Explicit provision, however, has been made to avoid anomalies arising in the case of persons with previous insurance. Senators will be aware that when social insurance was extended in 1974 to non-manual workers who had been excluded because their income was above the limit for insurability, previous periods of insurance which had been completed when their income had been below the limit served subsequently in effect to deprive them of entitlement to an old age pension. This arose because of their contributions were averaged from their first date of entry into insurance. This resulted in their average from that date to the end of the last contribution year before pension age being too low to qualify for pension.
I am pleased to say that this will not arise under this scheme. Persons with previous insurance who become self-employed contributors on 6 April 1988 will be able to choose that date as their date of entry if it is more favourable to them than calculating their average from their previous date of entry. This is provided for in sections 13 and 14 of the Bill.
Persons who fail to qualify for an old age contributory pensions will be eligible for the old age, non-contributory, pension on a means-tested basis. Up to the present, persons who entered insurance for the first time within ten years of reaching pension age have been entitled to a refund of the old age pension element of the contribution on the basis that they would be unable to qualify for a pension. Such refunds were paid irrespective of whether the persons concerned subsequently qualified for an old age non-contributory pension. As self-employed persons were not compulsorily insurable and as the majority did qualify for the old age non-contributory pension refunding contributions to employed contributors in these situations was clearly justifiable.
However, it would now be difficult to justify such refunds when virtually all persons whether employed or self-employed with an independent income are required to contribute. Persons who qualify on means grounds for a pension receive a substantial entitlement fully financed by the Exchequer. If they have contributed for even a short period as insured persons, such contributions should, in equity, be regarded as in part contributing to the cost of the old age pension. The National Pensions Board referred to this matter in their report and recommended that the refund of the old age pension element of the contribution should only be made, provided the person concerned does not qualify for a pension on a means-tested basis.
I am accepting the advice of the National Pensions Board in this regard and the necessary provision will be made in regulations.
Representations have been made to me in relation to self-employed persons who have never been insured before but who, because they have less than ten years to go before pension age, will not under the present rules be able to qualify for an old age pension. My Department examined in detail the possibility of making special provision to enable such persons to continue paying contributions after age 66 until they had ten years of insurance completed. The potential cost of this concession, however, would be prohibitive. It was estimated that in year 11, the first year in which the persons concerned would qualify for a pension, the additional cost of paying them the pension would be £40 million for the full year alone. This would actually exceed the total amount of contributions collected from them in the previous ten years and would be a major continuing cost over the following years. Accordingly, they have not been included.
The National Pensions Board concluded that the conditions for entitlement to invalidity pensions as they apply at present to employees would not be appropriate for the self-employed. They undertook to deal with the whole question of invalidity pensions in a future report and recommended that, in the meantime, pension cover for this contingency should not be provided. I accepted the advice of the board and recommended to the Government that invalidity pension cover for the self-employed be postponed until I receive the board's report.
It was also envisaged that entitlements to the old age pension in the case of the self-employed would be subject to a retirement condition. The National Pensions Board, while recognising the importance of retirement condition in the case of the self-employed, decided that they would need more time to examine the full implications of introducing such a condition. Therefore, the Government decided that in the meantime old age pension cover the the self-employed would be on the same basis as for employees, namely, a pension from age 66 without a retirement condition. Both of these questions, the retirement condition and the invalidity pension, are matters that will be further considered in the light of the report of the pensions board.
The one aspect of the proposed scheme that has given rise to most discussion has been the cost of and the financing arrangements for the scheme. Concern has been expressed that the scheme will put a longterm financing burden on the Exchequer and that the rate of self-employment contribution is not high enough. Much of the comment which has been made has not, however, been well informed and I would like to clarify a number of points in this regard.
A majority of the members of the National Pensions Board recommended that, on the grounds of equity, the rate of contribution should be the same as the combined employer-employee rate for old age and widow's and orphan's pensions — that is a rate of 6.6 per cent, when allowance is made for the tax relief on the employer's contribution. The board recognised, however, that in setting the rate of contribution the Government would have to take into account the ability of the self-employed to pay the rate recommended. This is, of course, what the Government did in deciding to phase in the contribution to be paid over three years. Thus, the contribution will be 3 per cent in the contribution year 1988-89, 4 per cent in 1989-90 and 5 per cent in 1990-91 subject to a minimum contribution of £208 in each year and this is explicitly provided for in the Bill.
The board also considered that a minimum contribution is necessary in the case of the self-employed paying income-related contributions, given the fact that capital allowances are deductible for PRSI purposes. Otherwise self-employed persons with a reasonable level of income who could claim for relatively high capital allowances, could end up paying a very small amount by way of a self-employment contribution. A minimum contribution of £208 or £4 per week is reasonable in these cases.
The Government also accepted the view of the National Pensions Board that it is necessary to have a system of flat-rate contributions for those whose incomes are below the level at which they are regularly assessed for income tax by the Revenue Commissioners. It was concluded that a flat rate contribution of £208, equivalent to the minimum contribution for those paying income-related contributions would not be justified. The level of flat rate contribution for people in this situation has been set at £104 per annum which is the equivalent of £2 per week.
In deciding on the rate of contribution to be charged, the Government have also been determined to ensure that the yield from the contributions would be adequate to meet the additional cost of the proposed scheme and, at the same time, reduce the existing burden on the Exchequer of financing social welfare pensions for the self-employed. The first issue in this regard that had to be considered is the overall cost of the scheme and the estimates of the cost over a 50 year period have been set out for all to see in the report of the National Pensions Board. The Government fully accept these estimates.
Given the speculation in recent weeks about the impact of the proposed scheme on the Exchequer, I would like to refer, in particular, to the projected additional costs of the scheme. The board showed that the additional costs, over and above the costs of continuing the present arrangements, will be just £6 million in year five, £21 million in year ten, £73 million in year 20, £99 million in year 30, and £89 million in year 50.
Much of the erroneous speculation, however was based not on the cost but on the anticipated yield from the self-employment contributions. This was due to a misunderstanding of the yield for 1988 of £15 million referred to in the Financial Statement of the Minister for Finance on budget day. That £15 million is the estimated yield of a 3 per cent contribution to be collected in an eight-month period only from April to 31 December this year and no account was taken in that estimate of any yield from the flat rate £104 contribution as the collection arrangements for that contribution will not be operational in time to effect any significant yield this year.
The Revenue Commissioners have estimated that in a full contribution year the actual yield from a 5 per cent contribution will be £45 million and that the flat rate contribution would yield an additional £5 million when the collection arrangements for this contribution are fully operational. This is a conservative estimate and I am confident that the actual yield may prove to be significantly higher.
Serious allegations have been made during the past few weeks that the Government, in introducing this scheme, are aiming merely to achieve a short-term improvement in the State's finances but at the price of incurring major liabilities in the longer term. This is not the case and, in fact, express provision has been made in this Bill for a review of the scheme to be carried out in a little over two years from now in the period October to December 1990. At that stage data on the actual yield from self-employment contributions will be available. By that stage too, the final report of the National Pensions Board will be available which will, among other things, contain a detailed examination of the projected cost over a 50-year period of the existing scheme for employees.
On the basis of this information the Government will then be in a position to decide what level of contributions based on the principle of equalised contributions recommended by the National Pensions Board will be adequate to finance basis social welfare pensions over a 50-year period. This information will be arrived at objectively and will show what is required to maintain the financing of social welfare pensions on a sound footing and, in particular, what level of contribution should be made by all contributors whether in employment or self-employment.
I would now like to say a few words about the collection of contributions from the self-employed. Those whose incomes are subject to Schedules D and F will pay the social insurance contribution, health contribution and employment and training levy with their income tax. The government have decided that collection of the self-employment contribution, health contribution and employment and training levy will be combined with income tax in the case of Schedule D taxpayers in the same way as the PRSI contribution is combined with income tax under the PAYE system. Thus, when a person subject to Schedule D receives his demand for tax, the amount charged will include income tax and PRSI contributions. The new system will be much more cost effective, will result in much greater compliance on the part of contributors and will also be more straightforward for contributors who will now have just one tax demand to deal with.
I would like the Senators to particularly note the collection arrangements because the integrated collection system is totally new and will overcome many of the problems previously experienced. Previously when moneys were outstanding, the demands both administratively and legally for the tax amounts were dealt with separately from the demands for PRSI and health contributions. That has been one of the major weaknesses in the system. The one procedure will now bring that money in together. It also means that the penalties which apply in the tax area will now apply. That is something which should not be overlooked.
In the case of those self-employed contributors, for example proprietary directors, who are subject to tax under Schedule E, they have hitherto been liable for a class K contribution of 2.25 per cent which represents the health contribution and employment and training levy. From April they will be liable for a new class S contribution which will include in addition to the existing 2.25 per cent, the extra 3 per cent PRSI contribution, increasing to 4 per cent and 5 per cent in line with the contribution of self-employed contributors generally.
The income-related contribution of 3 per cent, 4 per cent or 5 per cent, subject to the minimum of £208 per year, will be collected by the Revenue Commissioners and liability will commence from 6 April next. The £104 flat-rate contribution will be payable by persons who are not being regularly assessed for income tax. On the basis of information on their income supplied to the Revenue Commissioners, the person concerned will be formally notified that they are not required to make a return of their income but that they may be liable for the £104 contribution. Whether they actually have to pay that contribution will depend on whether their income exceeds the minimum level of £2,500 for inclusion as a self-employed contributor. The notifications from the Revenue Commissioners to the people concerned will have issued in the bulk of cases by the end of the summer. I am taking the necessary powers in the Bill to enable the actual liability for the first year in these cases to be prescribed in regulations. The precise mechanism by which the £104 contribution will be collected and the date of commencement of this aspect of the scheme are under consideration at present and the details will be announced as soon as possible.
Moving on to the final part of the Bill, there are a number of proposals to improve and streamline some of the existing provisions of the Act. A series of measures in relation to prosecutions, proceedings and increases in fines for offences in relation to the Social Welfare Acts is contained in sections 19 to 22 of the Bill. Section 19 provides that an offender shall not get the benefit of the Probation Act until such time as any amounts due to be repaid to my Department have been repaid. Section 20 is an omnibus provision which consolidates the existing provisions in relation to proceedings and prosecutions for offences under the Social Welfare Acts.
Section 21 and 22 provide for increased penalties and fines for prescribed offences for employers and employees under the various insurance and assistance schemes. The maximum fine for conviction on indictment is being increased from £3,000 to £10,000 and the maximum term of imprisonment is being increased from two to three years. This will bring the provisions into line with those provided for in the Social Welfare (No. 2) Act, 1987. Certain fines for lesser offences are also being increased.
Senators will be aware that a great deal of work has been done in preventing fraud and abuse of the social welfare system in the past year. We are making considerable headway in tackling this issue. I have always said that the vast majority of claimants are fully entitled to their social welfare payments and are only interested in obtaining what is legally due to them. However, there are some unscrupulous employers and employees who seize any opportunity to exploit the system or, indeed, to manipulate it to their own benefit. These people have no regard for the legitimate rights of the vast majority of social welfare claimants. They have no regard for the hundreds of thousands of taxpayers who maintain the social welfare system through their contributions for those of their fellow workers who depend on social welfare payments.
Section 23 is a technical amendment to the disability benefit scheme which provides that, for the purpose of determining whether a claimant has exhausted 52 weeks' entitlement to disability benefit, only claims which occurred during the previous six years will be taken into consideration. It introduces a cut-off point of six years beyond which previous claims will not be reckoned. This will affect only a very small number of claims and will operate to the advantage of the claimants concerned.
The opportunity was taken in last year's Social Welfare Act to round to the nearest 10p the weekly social insurance and assistance personal rates and increases for adult and child dependants. The purpose of the rounding was to simplify as far as possible the large number of payments now being made. Section 24 applies to amounts of injury benefit and unemployment assistance payable for periods of less than a week while section 25 provides that the scale of rates for unemployment assistance purposes will be in units of 10p rather than 5p as heretofore.
Section 26 of the Bill removes the obligation on urban local authorities to contribute towards the cost of unemployment assistance. The contribution which has been in operation since 1933 and which is based on rateable valuation amounts to about £0.5 million per year. In the context of annual expenditure on unemployment assistance of £444 million and in the light of the size of the Exchequer contribution to local authority financing, the current contribution is anachronistic and is, in effect, a circular transfer between State agencies. The amount involved will be met in the future by the Exchequer.
Section 27 of the Bill provides for an amendment to the Employers' Employment Contribution Scheme Act, 1981, so as to permit the unspent funds of the scheme to be transferred elsewhere. The purpose of the scheme, which operated for a period of one year, 6 April 1981 to 5 April 1982, was to maintain employment levels in the textile, clothing, footwear and leather industries. It was funded by employers to the extent of an additional 0.2 per cent on their share of the PRSI contribution. At present, there is a balance of about £15,000 remaining in the scheme's account and about £370,000 awaiting transfer from my Department. This arose from delays in the collection of contributions for the year in question arising from liquidations and receiverships.
In total there is £385,000 there. The provision in the Bill enables both existing and future funds to be transferred to the occupational injuries fund which is financed entirely from contributions from employers. I thought this was the fairest way to treat these funds since they were funded by employers directly in the first instance.
I now come to a new pre-retirement scheme which I see as a very important initiative and part of my ongoing efforts to introduce greater flexibility into the unemployment payments system to cater for the needs of particular groups. The rapid increase in the numbers unemployed in recent years has highlighted the fact that there is a great diversity of groups of unemployed persons on the live register. Some are prepared to accept part time jobs in the hope that they will lead to full time work; others would like to use this period of enforced inactivity in a constructive way by improving their educational attainments. Some persons would like to become involved in community activities and volunteer their services for the good of their communities. I have always felt that we should cater for the varying needs of the unemployed in so far as this is possible within the confines of my Department's main business which is to provide income maintenance to those not in a position to support themselves or their families.
Provision is being made in this Bill to cater for one group, namely, the older long term unemployed. The pre-retirement scheme is intended to provide more flexible arrangements for older unemployed people many of whom are in fact semi-retired and not really members of the labour force. At present, these people are required to sign on each week at their local office where they receive their cash payments. This new scheme would relieve claimants of the necessity of attending the local office while, at the same time, providing them with alternative arrangements for receiving their basic income maintenance entitlement.
Section 28 of the Bill sets out the basic conditions to be satisfied by a person in order to be eligible for the pre-retirement allowance. The scheme will be optional. Those who qualify for the allowance will be paid by pension order book which can be cashed weekly at their local post office and they will not have to attend the local office to sign on. However, they will be asked periodically to confirm that they are still, in fact, retired. Initially, the scheme will be confined to persons over 60 years of age who are entitled to the maximum rate of unemployment assistance.
Section 29 of the Bill extends the scope of the occupational injuries benefit scheme to unemployed persons undergoing training courses provided by ACOT and CERT. FÁS trainees — formerly AnCO — already have cover for occupational injuries benefit and also have contributions credited to them during periods of training. A similar facility is being provided in relation to ACOT and CERT trainees.
Section 30 of the Bill provides that regulations may be made giving entitlement to pensions at a reduced rate to those persons who, having earlier left the insurance system came back into insurance on 1 April 1974 when the earnings limit for insurability was abolished and all workers became compulsorily insured, irrespective of their income.
Before 1974 non-manual workers whose earnings exceeded a prescribed limit were excluded from social insurance. This limit was increased from time to time and consequently some persons found themselves in and out of insurance for periods as their earnings fluctuated about and below the limit set.
They now find themselves adversely affected when they reach pension age because of the intermittent nature of their insurance records prior to 1974. The yearly average of contributions necessary for qualifying for pension in their case is calculated over a long period going back to when they first became insured and is diluted by the gaps in their record caused by the periods when they were out of insurance. Consequently, the minimum average number of contributions necessary is not satisfied in their cases and they do not qualify for pensions.
By contrast, those who had never been insured prior to 1 April 1974, because their earnings were reasonably high and they were always over the insurable limit, have the yearly average number of contributions calculated over a shorter period which only goes back to 1 April 1974, the date they first became insurable.
Thus it can happen that this latter group may qualify for pension on the basis of relatively short periods of contributions while others who may have contributed over a longer periods and overall have paid a greater number of contributions may not qualify for a pension at all.
I have been very concerned about this anomaly for some time. The plight of this group of former workers was highlighted in the report of the Commission on Social Welfare. This provision will enable me to do something for the 1,250 persons now involved. Following the enactment of this legislation, I will be making regulations providing reduced pensions for them in line with the commission's recommendations with effect from October next.
The Bill provides for the transfer of information, whether computer based or otherwise, between the Department of Social Welfare and the Revenue Commissioners so as to facilitate the proper administration of social welfare schemes including the registration of self-employed contributors. Provision is also made for the transfer of information between the Department and other specified bodies such as local authorities and health boards for the purpose of the administration of social welfare schemes and other schemes administered by these bodies.
By any criterion this Bill is a major piece of legislation containing a number of very significant improvements in the social welfare code. The extension of social insurance to the self-employed, which is long overdue, will fill a major gap in the present system. The other provisions in the Bill also represent very significant improvements for people who depend on social welfare. I am very pleased to be in a position to propose this package of measures and I commend the Bill to the House.
