The recent Supreme Court decision, which found that a section of the 1985 Equal Treatment Act was defective, has major implications for the social welfare system. It raises the whole issue as to whether social assistance can continue to be paid on the basis of household needs and also the question as to how a household is to be defined for this purpose.
To deal with the situation arising from the Supreme Court decision, the Government decided on two courses of action. First the Government have decided to undertake a fundamental review of the concept of the household for social welfare purposes and have set up a high-level review group for this purpose. The function of the review group, which will be chaired by Mr. John Curry, formerly Chairman of the Commission on Social Welfare, will be to examine the social Welfare code in so far as it affects households in relation to the payment of social assistance and to provide guidelines for the future direction of policy in this area.
Pending the outcome of this review, the Government decided to introduce this Bill to remedy the particular defect in the 1985 Act identified by the court, by providing for equality of treatment between married couples and unmarried couples who are cohabiting as man and wife.
The function of the review group will be to examine the present arrangements for payments to households and to identify problems in this area having regard to the requirements of equality of treatment and the need to have regard to the costs of maintaining different households.
This will necessitate a fundamental review of the payments structure as it applies to different household situations as a basis for the allocation of further resources. The present system is based largely on the family as a married couple with payments being made in respect of the claimant, a dependent spouse and any dependent children. The various provisions for the assessment of means for the social assistance schemes also reflect this approach.
The Supreme Court decision requires that the existence of other types of household must be taken into account within the code. This is particularly so in so far as the present arrangements, which are essentially based on giving particular recognition to the married household, may have disadvantages for married couples as against other couples.
In my view, this is the most complex issue which has had to be addressed in the social welfare area for decades. It is an aspect of the code which was not specifically addressed by the Commission on Social Welfare. The commission recommended that, in the context of a unified social assistance scheme, payments should reflect household situations and that the appropriate rate for a couple should be 1.6 times the personal rate. The commission did not, however, consider in detail the concept of what should constitute a household for this purpose and how different household situations should be recognised and provided for. I am particularly pleased that the group will be chaired by Mr. John Curry, who in his capacity as Chairman of the Commission on Social Welfare, is more familiar than most with the provisions of our social welfare code. In the light of the review group's analysis the Government will consider what changes are required and these will be brought forward in time for next year's budget.
The Oireachtas will then have an opportunity to consider the various issues involved in the context of the associated Social Welfare Bill. I am grateful to the members of the group for consenting to participate in the review and I look forward with great interest to the results of their work.
The equal treatment arrangements introduced by the previous Government in 1985 provided that where both of a married couple are entitled to a social insurance payment in their own right, each receives the full personal rate of payment. The fact that the limitation provided for in section 12 of the 1985 Act only applies where one or both of the couple are entitled to unemployment assistance reflects the underlying objective of this scheme which is to provide assistance which is related to the needs of the household. This means that households with similar needs should receive the same level of financial support. It would be inequitable to provide households with identical needs, with different levels of payment which is what would happen if the limitation were not applied. For example, married couples where both spouses are available for work would receive a substantially higher payment than the vast majority of other married couples where one spouse works in the home. This situation would be in total conflict with the needs based nature of the unemployment assistance scheme.
The provisions of the 1985 Act are based on the principle that the level of unemployment assistance payable should be related to the needs of the household. This principle is not unique to this country. The social security systems of many of our European partners provide for a lower rate of payment to persons who share the same household.
These systems are based on the principle that the needs of a couple living together are less than those of two persons living in separate households. This stands to reason as there is a sharing of basic resources such as accommodation, heating, lighting and other household goods.
Recent research in this area in the UK and the United States for example demonstrates that a payment rate of 1.6 times that of one personal rate is reasonable.
It is evident, however, that while the principles which underlie the present system are reasonable, the system is inconsistent in the way in which it treats families in different household situations. The review group will have to consider what changes are required to ensure that households with similar needs receive the same level of support. Clearly it will be necessary for the group to take account of the requirements of the equal treatment directive. In a sense, the requirements of equal treatment were responsible for our present difficulties inasmuch as the approach adopted was to discontinue the head of household concept.
While I do not wish to pre-empt the outcome of the review, I suspect that it may be necessary for us to follow the trends in other countries by returning in some shape or form to the head of household concept which existed prior to 1985 and applying the concept to all of the different household situations which can exist.
The basic principle embodied in the 1985 Act, that unemployment assistance to married couples should be paid on the basis of household needs, is a reasonable one and this Bill is designed to uphold this principle. To do so, however, it is necessary in the light of the Supreme Court judgment, to also apply the principle to the small number of households comprised of unmarried cohabiting couples who qualify for unemployment assistance. It has yet to be established how many, if any, such households are covered by this provision. It is clear, however, that the number involved will not be great.
During the passage of this Bill in the Dáil, many Deputies expressed concern at the absence of a definition of cohabitation in the Bill. There is of course nothing new about the concept of cohabitation in social welfare legislation and it already applies in a number of the schemes. The concept itself is relatively straightforward. In a recent High Court case the court stated that it had no difficulty in understanding cohabitation as meaning living together as through a married couple when not married.
The application of the condition in those schemes in which it currently applies does not give rise to major difficulties. Claimants are required to notify the Department of any circumstances or change in circumstances which may affect their claim and claimants generally do meet their statutory obligations in this regard. Problems can, of course, arise in situations where claimants attempt to conceal the fact that they are cohabiting. In order to prove that the claimant is cohabiting, it is necessary to establish that the couple actually live together and that there is a financial aspect to their relationship. This involves an examination of the circumstances and duration of their living together including such matters as who owns or rents the property, how it is shared and the allocation of duties within the household. It is also necessary to examine the couple's financial arrangements to determine if the financial responsibilities are shared in a way similar to those of a married couple. The social and sexual aspects of the couples relationship would obviously also be factors in establishing cohabitation. I would stress, however, that any investigation into these areas is carried out in a way which is not intrusive and in which there is full regard for rights of individual claimants.
The Bill addresses specifically the issue of couples who are cohabiting and applies to them the same rules as apply to married couples. Cohabitation is of course only one of a number of household situations which can arise. Other obvious examples are brother and sister households, parents and children both claiming or a number of people sharing a flat. These are the sort of situations which will need to be addressed by the review group so that a consistent and equitable approach can be adopted in the distribution of resources in the future.
The problem of households consisting of more than one person with an individual entitlement has arisen in the past in relation to the fuel allowance scheme. In that case, the issue was resolved by providing one allowance per household despite the fact that there may be several persons in the household with individual entitlements. This is the only realistic approach to adopt in this situation. It would be ludicrous to provide more than one allowance where there are several persons residing in the household who each have an individual entitlement to a fuel allowance. Obviously there is only one house to be heated. While one might say that the fuel allowance should be higher, there would be no sense in providing more than one fuel allowance in each house in a means tested assistance scheme.
What we are trying to do is to provide social assistance on an equitable basis to families. This is consistent with the Government's whole approach in the social welfare area which has been particularly focused on families. Since taking up office we have provided substantial additional assistance towards helping families who are dependent on social welfare payments and families where the breadwinner is employed and on low pay. During the past two years, the Government have allocated an additional £257 million specifically for improvements in the social welfare area. This year we have again concentrated significant additional resources on larger families and particularly those on low incomes.
It is generally accepted that families headed by an unemployed person, particularly large families, are most at risk from poverty. The Government have recognised the special needs of the unemployed and large families and since taking up office in 1987, we have introduced a number of measures which have significantly improved their position. For example, a special increase of 11 per cent was provided for the long-term unemployed last year, while a further special increase of 12 per cent was provided this year. That is in contrast to inflation rates of less than 2.5 per cent at the time. In practical terms this means that a family with five children and on long-term unemployment assistance have received an increase of £29.10 in weekly income over the past two years.
The position of many families who depend on social welfare has been further enhanced by the provision of special increases for adult dependants, usually a wife working in the home, and a minimum child dependant allowance of £10 a week. In addition we have simplified the system through the streamlining of the various rates payable in respect of dependants. The number of rates of child dependant allowance have been reduced from 36 to 12 and the number of rates payable in respect of adult dependants have been reduced from ten to six. This significant simplification of the system was carried out by levelling upwards and this has resulted in additional gains for many families.
Child dependant allowances payable to recipients of long-term social welfare payments have been extended up to age 19 where children continue in full-time education. The Government regard this as a first step towards eventually extending the period of payment of the child dependant allowances, where the child is in full-time education, to 21 years.
The Government regard child benefit as a vital support for the family as it is payable to the mother regardless of whether the parents are employed, unemployed or on some other social welfare payment. The higher rate of child benefit is being extended to the fifth child from October next. This measure is aimed at the special difficulties faced by larger families.
The Government are also conscious of the difficulties faced by men who are bringing up children on their own. In many cases they are dependent on the lowest level of social welfare payment, supplementary welfare allowance. I was very pleased that the Government agreed to my proposal to introduce new social assistance schemes for widowers and deserted husbands with dependent children. The practical effect of this measure is that the payment to a widower on supplementary welfare allowance with five children will increase from £80.80 per week to £115.30 under the new arrangements. This represents a very substantial increase of £34.50 per week. This is in addition to the increase in child benefit for large families, which would increase the weekly gain to £36.05. It is estimated that 5,500 men will benefit from the new schemes.
We are also very conscious of the position of families employed on low pay. We have taken a number of important and innovative steps in this area this year. The tax changes announced in the budget as part of the measures to tackle poverty have significantly improved the position of many families on low pay. There has been an increase from £5,500 to £6,000 in the tax exemption limit for married couples together with a new special tax exemption of £200 in respect of each child. This means that a married couple with five children can earn up to £7,000 without paying any tax.
Before April this year a couple earning £7,000 would have been liable to pay almost £635 a year in tax. This represents a net gain of £13 a week to such families. There are reducing gains for a family of this size with annual income of up to £9,000. This is a feature that has not been much remarked on by commentators but it is a particularly valuable development for families living on relatively low pay. The Government decided to direct extra resources to that scheme this year as a means of getting money directly to families on low incomes.
In addition to these special tax measures for low paid workers, the Government have provided an extra £1 million for improvements to the family income supplement scheme. This scheme is designed to lessen the disincentive to work caused by the narrow gap which can arise between low take-home pay and social welfare benefits.
As part of the Programme for National Recovery the Government undertook to carry out a detailed examination of the scheme. Following on this examination which has recently been completed, a number of major improvements in the scheme are being introduced with effect from July next. These improvements are designed to increase the numbers of families benefiting from FIS, especially larger families.
The main improvements being made include: — increases in the weekly income limits for receipt of payment ranging from £4 to £38 depending on the family size; increases in the maximum payments ranging from £2 to £21 a week; extra payments to families with six, seven and eight children; an increase in the rate of supplement from 50 to 60 per cent of the difference between family income and the relevant income limit, and a reduction from 24 to 20 in the minimum hours of work required each week to benefit under the scheme. In the case of a two-earner family, their hours worked may now be aggregated.
These improvements could more than double the number of recipients of family income supplement and will result in a substantial increase for those on low pay. For example, a family with five children who have an income of £120 a week will now receive a weekly payment of £50.
All of these improvements in the social welfare area have been made possible through the efficient allocation of resources in a fair and equitable manner. We have more than maintained the real value of social welfare payments and, in addition, we have provided substantial increases for those on the lowest levels of payment. For example, some families will be £40 a week better off as a result of this year's improvements. This clearly demonstrates the strength of this Government's commitment towards protecting the position of the family.
Let me now deal with the provisions of the Bill. Section 1 remedies the defect identified by the Supreme Court by extending the provisions of section 12 (4) of the 1985 Act to unmarried couples who are cohabiting as man and wife.
There are two subsections in section 12 which are being amended. Section 12 (1) provides that where both of a married couple are entitled to unemployment assistance, the overall amount of assistance payable to the couple would be limited to what they would receive if only one spouse claimed and received an increase in respect of the other as an adult dependant. The Act provided that each of the couple would receive half of the appropriate "married" rate of assistance.
Section 12 (4) of the Act provided that where one spouse is in receipt of a benefit or pension and the other is in receipt of unemployment assistance, the overall payment made to the couple would be limited to what they would receive if the spouse entitled to the higher benefit or pension payment claimed and received an increase in respect of an adult dependant. In this instance, the Act provided that the payment to the spouse entitled to assistance would be reduced in order to stay within this limitation.
The Supreme Court judgment concerned section 12 (4) only and in its judgment of 9 May 1989 the court found that this subsection was defective in that it treated married couples less favourably than cohabiting couples. While section 12 (1) was not at issue in these proceedings, this subsection, which limits the entitlements of married couples in exactly the same way, must also be regarded as defective.
Section 2 provides that any claims for unemployment assistance made on or after the date of the Supreme Court judgment will be payable in accordance with the provisions of the amended section 12. This section also provides that married couples to whom the provisions of section 12 applied, who have not submitted claims in writing or initiated court proceedings for an increased rate of unemployment assistance prior to the date of the judgment will not be entitled to retrospective payment.
By virtue of section 2, the provisions of the amended section 12 will apply to couples cohabiting as man and wife with effect from 9 May 1989. Section 3 provides that any such persons who may have benefited from the higher rate of payment will not be liable to repay any payments made under the present arrangements.
In conclusion, I consider the provisions of this Bill to be the only reasonable and responsible approach in the circumstances facing us in the light of the Supreme Court decision. We are dealing with the immediate problem arising from the decision by treating married and cohabiting couples equally in relation to the payment of unemployment assistance in a way that reflects the needs of the household. At the same time, we are dealing the wider implications of the court's decision by undertaking an urgent and comprehensive review of the provisions of the needs-based social assistance schemes. I believe this review will lead to a major reform of our payment structure so as to bring about greater equity and consistency in the treatment of households with similar needs through the various social assistance schemes.
I commend this Bill to the House.