Seanad Éireann díospóireacht -
Wednesday, 9 Nov 2011

Vol. 211 No. 5

Adjournment Matters

Social Welfare Code

Senator Fidelma Healy Eames

I welcome the Minister of State again. He has been here two weeks in a row. I call on the Minister for Social Protection to justify how self-employed PRSI contributions can be taken from an individual while that individual, a self-employed person, is entitled to nothing and to no financial contribution when injured or ill through no fault of his or her own.

Self-employed people in Ireland pay an S class social insurance payment as mandatory. The payment stands at 4% of earnings of all reckonable income above €5,000 or €253, whichever is greater. This contribution entitles the payee to class S benefits, including widow's, widower's or surviving civil partner's pension contributions; guardian payments contributory; State pension contributory; maternity benefit; adoptive benefit; and bereavement grant. Unlike most other classes of social insurance payments, class S PRSI does not provide cover for any other schemes or benefits such as jobseeker's, occupational injuries or illness benefits. The Minister of State knows that in the current downturn self-employed people, not just their employees, have suffered high levels of unemployment. They have paid not just their own but PRSI but employers' too. The situation seems to be totally unjust.

Many people have raised this issue with me and have asked why they are the fall guys. The rules governing PRSI contributions by the self-employed, which prevent access to State support, are causing unnecessary financial hardship for some families and need to be urgently reviewed. In addition, if we wish to foster and encourage enterprise and self-employment in Ireland we must seriously address this issue, something all members of the Government are trying to do.

It is absolute madness to expect self-employed people to pay a compulsory social insurance payment which provides no cover whatsoever if they are injured or become ill through no fault of their own. Many self-employed people now find themselves without work through illness and injury and are not covered by PRSI as a result of the rules governing contributions made by the self-employed.

I have met at least three people in my office about this issue. The livelihood of one man is at risk and he brought the detail of his situation to me. We need to explore the UK model which allows self-employed people to become employees in certain situations and pay PRSI contributions which offer protection when individuals become sick or injured and cannot work. It is a reasonable proposal.

One such example where this situation is causing serious hardship for people and their families is the case of a self-employed man who has paid taxes and PRSI since 2000. When he was injured in a road traffic accident, having been rear-ended by a drunk driver, he was shocked to discover he was not entitled to any injury or sickness payment while incapacitated and unable to work in July and August 2010 or following corrective surgery during July, August and September 2011.

In order to meet his financial obligations and living expenses on a daily basis he has had to arrange an overdraft with his bank, something which should have been paid for by sickness benefit. He has told me that while he could take out private insurance in the future at a cost of €300 for an annual premium providing benefits of €500 per week in the case of not being able to work due to injury, he cannot afford to pay for State and private insurance and illness is still not covered by either. If he had invested a small sum of money in private insurance rather than in the State he would have benefited from injury cover.

Self-employed people cannot continue to bear the burden whereby they are entitled to less from their social insurance contributions than their employees. It is strange that an employer, who is the multiplier and has the responsibility to pay employer and personal contributions, is entitled to nothing if he or she falls ill or becomes injured, especially when a self-employed person pays more in contributions than employees. The situation is grossly unfair and cannot be allowed to continue in a State which is crying out for people to become self-employed to help drive recovery.

I ask the Minister, through the Minister of State, to justify how the PRSI contributions of the self-employed can be paid, yet those who pay it are entitled to nothing when they become ill or are injured through no fault of their own. I look forward to the response.

Minister of State at the Department of Jobs, Enterprise and Innovation (Deputy Sean Sherlock)

Access to certain social insurance payments, which are based on PRSI contributions, differ between employees and the self-employed. While employees and the self-employed are liable to PRSI at the rate of 4%, employers also make a PRSI contribution of 10.75% in respect of employees, bringing the PRSI payment in respect of employees to a combined 14.75% rate per employee under the full class A rate. As a result, ordinary employees can build entitlement towards the full range of social welfare benefits based on the higher level of contribution. Class S self-employed contributions provide cover for long-term benefits, such as the State contributory pension, widow's or widower's pension or surviving civil partner's contributory pension.

I am keenly aware of the very difficult financial position self-employed people are now in. We have all heard cases in our clinics and advice centres, in particular small business owners who find themselves in a very precarious financial position. However, we have to strike a balance between contributions made and benefits received. PRSI coverage is related to the risks associated with employment or self-employment, the annualised system of contributions for self-employed people and the practicalities of administering and controlling access to short-term payment for self-employed people.

A system of separate arrangements for employed and self-employed workers within the social insurance context, such as this, is common in other European social protection systems. In this context, it should be noted that self-employed workers generally achieve better value for money by paying social insurance compared with employees. The 2005 actuarial review of the social insurance fund found it favours the self-employed over the employed when employer and employee contributions are included in respect of the employed person.

For example, a male married self-employed contributor earning gross average industrial wages had a value for money index of 10.3 compared with an index of 3.1 for an equivalent employee. In basic terms this means that, with regard to benefits, the self-employed contributor can expect to receive over ten times what he or she contributes to the social insurance fund compared to the employee who, even with access to a broader range of benefits, only gets three times what he or she and his or her employer contributes.

The analysis demonstrates that, despite the fact that they are eligible for a narrower range of benefits, self-employed persons can gain substantially more from the fund than employees. It should be noted that the State contributory pension increased in excess of inflation and earnings growth in the period up to 2010 while annuities offer CPI linked increases at best. The market cost of an inflation linked annuity with €12,000 a year in initial benefits is in excess of €300,000, without any associated survivor's benefits.

Any changes to the PRSI system in order to provide access to short-term benefits such as social insurance illness-related benefits would have significant financial implications and would have to be considered in the context of a much more significant rise in the rate of contribution payable. The Minister for Social Protection, Deputy Joan Burton, established the advisory group on tax and social welfare earlier this year to meet the commitment made in the programme for Government. It will examine and report on issues involved in providing social insurance cover for self-employed persons in order to establish whether it is technically feasible and financially sustainable.

Senator Fidelma Healy Eames

I thank the Minister of State. A large part of his response is the same as I outlined, in terms of long-term benefits.

I referred to illness and injury. Why is coverage not available for such cases, even at a greater cost? Can the Minister of State give me a commitment that the question I put to him will be submitted to the advisory group on tax and social welfare in order that it is considered, with a view to ensuring that anybody who finds himself or herself in such a situation has the right to buy benefits for illness and injury, albeit at a higher cost?

Deputy Sean Sherlock

I am happy to make a submission in light of the concerns raised. The State has to be mindful of the cost of implementing such a scheme, in terms of deriving short-term benefits. I take the point made on the advisory group on tax and social welfare. I will refer the matter to the Minister, Deputy Burton. I respectfully suggest the Senator engage with the Minister. The Senator referred to a specific case in her constituency.

Senator Fidelma Healy Eames

It is multiplied across the country. I had made a previous submission to the Minister but I have not got a response. That is the reason I am seeking the support of the Minister of State in this matter.

Deputy Sean Sherlock

I respectfully suggest that as the Senator has raised this matter on the Adjournment if she were to raise it again with the Minister she would respond. I will notify the Minister that it has been raised on the Adjournment.

Waterford Institute of Technology

Senator David Cullinane

I welcome the Minister of State to the House. In a previous Adjournment matter I tabled on foot of the job losses in TalkTalk, I raised the issue of the need for a university for the south east and for Waterford Institute of Technology to be designated as a university. At the time the Minister gave a commitment that he would visit WIT and he has done so. He will have seen the outstanding facilities there, including the ICT building, which was completed in October 2004; the nurse education building, which commenced in September 2004; the enterprise research centre; the tourism building; and the Telecommunications Software and Systems Group, TSSG. All of the building blocks have been put in place by Waterford Institute of Technology. The Port report, which first looked at the application by WIT for a university, stated that Waterford had the academic maturity and an activity profile that was similar to universities in Ireland and other western countries. It also mentioned the governance, management and strategic planning capabilities required of a university and stated that Waterford had all of those, along with an attractive and suitable campus environment and a secure asset base to permit future development.

In the wake of what has happened in Waterford city and the recent Government decisions, one being to locate the headquarters of the VEC in Wexford rather than Waterford city which has caused dismay, there is a need for the Government to accelerate this issue. It has talked about a multi-campus technological university and the Minister for Education and Skills has spoken about this recently. The question is what would that mean? The Minister spoke about the creation of a new technological university status which would complement our existing universities in meeting the full range of needs of students and the wider society.

The reason we are seeking a university is that the south east has been operating with one hand tied behind its back for far too long. Waterford city is the only gateway city without a university while the south east region has the critical mass of a population of almost 500,000. While I accept the Minister is looking at a multi-campus technological university the question the people in Waterford will ask is whether that will put Waterford into the top tier of university provision? The Minister ruled out the application made by Waterford Institute of Technology for simple designation and referred to comparisons with polytechnics in the UK. The major fear is that while some move might be made for Waterford, other ITs across the State might get a similar lift and then it will not be what the people of Waterford are seeking.

The issues around the application centre on funding. A university brings in more funding especially in the areas of research and development. Branding is important but not just in terms of a name change. There is no point in simply calling Waterford Institute of Technology a technological university if it is simply a beefed up institute of technology. It must be a fully fledged university that has the capabilities to meet the needs of the people of the south east. It is important in any future decisions that are made that Waterford Institute of Technology — I hope it will be a university — will have the same autonomy as the nine other universities in the State.

Not all of the opposition from outside Waterford to Waterford Institute of Technology being made a university is political. Opposition is also coming from the other nine universities. University politics has been at the heart of much of what has happened in regard to this issue for far too long. That is why I welcome the Minister's commitment to at least look at this issue and examine the possibility of a technological university. I see that as a step forward. However, the critical issue is one of equality in that Waterford and the south east should be on a par with every other region in the country. We cannot continue to limp along, playing second fiddle to all the other regions, trying to compete with regions which have universities, including the educational hub and opportunities for research and development which Waterford city does not have.

I mentioned the decision in regard to the VEC amalgamation. Many would have seen the decision to place the headquarters in Wexford rather than Waterford as political. In addition, IDA Ireland regional offices were moved out of Waterford city to Cork and elsewhere. To many in Waterford it appears that the State agencies and Departments have consistently let Waterford down. One thing that could be done quickly is to approve the application by Waterford Institute of Technology for a university to meet the needs of the people of Waterford, the business community, and the students who want to avail of university qualifications in their own city without the necessity to travel.

I spoke recently with Dr. Mark Rowe, chair of the Friends of the University of the South East. He is quite supportive of the idea of a technological university but will await the detail and see what emerges from the Government. He mentioned the brain drain from Waterford and the south east. That is, perhaps, one of the reasons we cannot compete for the jobs to enable Waterford city to function as the key economic driver of the region.

The national spatial strategy designated Waterford as the gateway city because Waterford should be the capital of the region. A strong economic performance from Waterford will result in a stronger region and Waterford city has to be the economic engine of the south east. Unfortunately, it is not being given the capacity by State agencies or by the previous Government and others to enable it reach its potential. There is huge potential in Waterford and it can be unlocked if the right decisions are made by the Government. I hope this will be the right decision. What action has been taken since the Minister for Education and Skills announced he would accelerate this issue and what are his future plans? When will Waterford hear a positive announcement from the Government that will lift the mood of the people in Waterford and the south east?

Deputy Sean Sherlock

I thank the Senator for raising this issue. The national strategy for higher education to 2030, otherwise known as the Hunt report, lays out a clear possible development pathway for amalgamated institutes of technology, which meet specified performance criteria, to seek redesignation as technological universities.

A small number of new technological universities, with their own legislative framework and a distinct mission that is faithful to the ethos of the technological sector, working with existing universities, institutes of technology and other education providers, can enrich the diversity and quality of the Irish higher education landscape.

Following publication of the higher education strategy, the Department commissioned input from an international expert, familiar with the Irish higher education sector, on the detailed performance criteria against which any future applications for redesignation as a technological university would be assessed. In its statutory advisory capacity, the Minister then asked the Higher Education Authority for its formal advice on final appropriate performance criteria. A consultation process on draft criteria has been undertaken by the HEA and it is understood that the HEA hopes to sign off its formal advice to the Minister at a meeting of the authority later this month. Following consideration of this, the Minister aims to be in a position to publish the designation criteria and the process arrangements before the end of December.

The establishment of a technological university will also require legislation and this will be advanced as part of the overall work programme for implementation of the higher education strategy. However, the first step is to provide clarity on the performance criteria, which will enable institutes of technology to consider their future options in an informed way. It is important to repeat that it has to be done in an informed and balanced way. It would not be right to designate a particular structure as a technological university at this stage, it must go through a proper academic and formal consultation process while retaining the need to ensure the commitment is maintained.

Any decision must be made on the basis of sound academic and performance-related criteria. The first step is to provide clarity on those performance criteria, which will enable institutes of technology to consider their future options in an informed way. Once a process is in place, it will be open to institutes of technology to come together to make applications for consideration for redesignation. That is an eminently sensible approach. All applications, including any involving Waterford Institute of Technology, will be considered under an independent assessment process. This is a necessary prerequisite of upholding the quality and international reputation of the higher education system.

There is a clear understanding, on a cross-party political basis, of the need to ensure there is balanced regional development, as referred to by Senator Cullinane. I acknowledged during a recent visit to Waterford Institute of Technology, including the TSSG centre, that world-class research is being carried out there. It is an exceptional entity of which people in the Waterford region can be very proud. The capability and capacity are there, but we must go through a process. Moreover, it must be a logical and informed process rather than a knee-jerk reaction which could create an entity that is not self-sustaining. We must ensure that whatever is created can sustain itself and compete with other institutions. We should also take into account that there are as many students on the campus of Stanford University in California as there are in third level institutions throughout the Twenty-six Counties. We must think relatively and be careful of how we proceed.

Senator David Cullinane

I acknowledge that the Minister, Deputy Ruairí Quinn, has done more on this issue in the months he has been in office than his various predecessors did over many years. That is most welcome. The Minister of State, Deputy Sherlock, stated in his reply: "The first step is to provide clarity on those performance criteria, which will enable institutes of technology to consider their future options in an informed way." The concern in Waterford is that any change might amount to no more than a name change, with institutes of technology designated as first tier or second tier and the latter perhaps redefined as technological universities but without being on a par with the other nine universities. While I accept there may be logic in having technological universities, there is legitimate concern in Waterford Institute of Technology in this regard. Going back to the point I made about the nurse education building and the humanities courses provided by Waterford IT, how will they fit into a technological university? That is another legitimate concern. Nevertheless, I welcome the positive moves made by the Government thus far. It has done more in recent months than previous Administrations have done for many years.

Deputy Sean Sherlock

I acknowledge the legitimate concerns expressed by the Senator. The institute of technology sector of itself is very much engaged on those points, particularly in regard to the humanities and the social sciences side as they pertain to the sector. I am also confident those questions have arisen in the context of deliberations on the Hunt report. Nevertheless, I will convey the concerns outlined by the Senator directly to the Minister, Deputy Quinn.

The Seanad adjourned at 3.55 p.m. until 10.30 a.m. on Thursday, 10 November 2011.