I thank the Cathaoirleach and Senators for the opportunity to brief them on a range of social welfare matters and to discuss developments——
Social Protection: Statements, Questions and Answers
I would like to call a quorum.
Notice taken that 12 Members were not present; House counted and 12 Members being present,
I will outline the changes I have made since I was appointed Minister in March and give a flavour of the challenges facing us and how I propose to tackle them. I have looked with fresh eyes at the existing social protection system, schemes and policies. I am targeting aspects of the system for change and development while, at the same time, following through on commitments for my Department in the programme for Government. The job we all have is to rebuild our welfare state in a way that is appropriate to the 21st century and this is a huge challenge.
I refer to expenditure on social welfare. The social protection budget increased dramatically during the Celtic tiger years. In 2001, spending on social protection stood at €7.84 billion and the 2010 outturn stands at €21.35 billion. This is an increase of 272%, which is way in excess of the increase in inflation of approximately 30% during the same period. Spending on schemes, services and administration in 2011 is estimated at €20.62 billion. Support for children and families accounts for 11.8% of expenditure or almost €3 billion, of which €2.07 billion will go on child benefit. A wide range of supports for people of working age accounts for more than 54.7% of overall expenditure or almost €11.3 billion. Jobseeker's allowance and jobseeker's benefit account for in excess of €3.6 billion while more than €1.1 billion will be spent on the one-parent family payment. Carers will receive €762 million in total. Pensions and other supports for retired and older people account for 29.6% of overall expenditure or €6.1 billion.
Now that the recession has bitten hard and deep we have a scale of expenditure that is completely out of step with our ability to fund it. We do not have the means or revenue as a country to support our level of spending. This year, spending will be approximated €18 billion more than overall Government income. The Government will get €42 billion from tax and PRSI, over €20 billion of which will be spent by the Department of Social Protection. The Department accounts for 39% of all current expenditure and therefore a sustainable fiscal position cannot be achieved without some reduction in welfare expenditure.
A core commitment in the programme for Government is the restoration of fiscal stability. Restoring fiscal stability is essential to saying "Goodbye" to the IMF and the troika. Even those who favour default would have to cope with exactly the same issue, except in that event, the deficit would have to be cleared in a year rather than over the period in the negotiated programme. My Department has recently completed a comprehensive review of expenditure which will inform the budgetary process and will help to identify how we find a balance between reducing expenditure and supporting those most in need through the supports and services offered by my Department. I am conscious of how many people rely on support from the Department of Social Protection. Offering them the continuation of that support is vital but we must equally help people get to back to work and achieve economic independence. We talk about national sovereignty but personal financial independence is also an issue, particularly for people of working age. If they from time to time lose their job or become ill, they should get support from the social insurance system.
People have spoken recently about illness benefit and statutory sick pay. The number of people claiming illness benefit and other disability payments has increased greatly in the past ten years from about 170,000 to 247,000. The cost to the Exchequer of paying illness benefit, not disability and not invalidity benefit, has risen from €330 million to €900 million during that period. At any given time there are 80,000 people on illness benefit. That amounts to 20 million working days lost for which the Department of Social Protection is paying. In European terms, the 20 million working days, compared with the number of people at work in the economy, is very high when compared with our competitors. We have people in work who become seriously ill and for whom the supports are provided. The cost to the State of all schemes that cover illness and disability will amount to over €2.7 billion this year. Illness benefit is €900 million and other payments related to illness and disability bring the total to €2.7 billion.
Introducing statutory sick pay would only mean that employers would have to pay for sick pay for their employees for a period of up to four weeks. After that, the State would continue to pay and would fund invalidity and disability payments. This reform would still leave Irish employers in a very favourable position compared with their counterparts in competitor countries, such as Britain and the Netherlands, where employers pay for sick leave for more extended periods. The social protection budget could be cut by more than €150 million if this reform was introduced.
Most other European countries, including all of our major competitors, oblige employers to pay for some sick pay costs. In the Netherlands the employer pays for up to two years. In Britain, one of our most important markets and competitors, the employer pays for up to 28 weeks. In Belgium the employer pays for up to four weeks while in Germany the employer pays for up to six weeks. This has been researched in depth because it is an important issue in most developed economies with good social protection systems. OECD research has indicated a strong link between the period of sick absences and employer contributions to sick pay costs, both in the public and private sector. The social insurance fund should pay for long-term illness benefit while the short-term benefit should be payable by employers. If managers had to manage sick pay as a budget item, absenteeism could be reduced in the public and private sectors. All the OECD evidence points to this being so.
It is notable that absentee rates in the Netherlands dropped from 10% to 4% after statutory sick pay was introduced. This is the difficulty we face when debating these reforms. We can hardly expect the troika to accept a situation where the country they are bailing out is in danger of becoming this decade's "sick man of Europe". Fifteen years ago in the Netherlands, 1 million people were being paid sick pay and that figure was reduced by 50% over a period of years.
The OECD notes that Ireland does not oblige employers to pay a contribution and recommended in a report published in 2008 that Ireland should consider introducing such a scheme. Even though Ireland does not oblige employers to pay a contribution to sick pay costs we still have one of the lowest average rates of employer PRSI as measured by the OECD. Our rate of PRSI for employers is low at 9.7% compared with 18.2% in Finland, 16.2% in Germany, 23% in Belgium, and 12.9% in Poland. Even Latvia, which people talk about as a very low tax country has high employer and employee PRSI rates to provide for its social security system.
Our low employer PRSI rate means that the social insurance fund is running a deficit which amounted to €2.5 billion in 2010. This deficit cannot go unaddressed. In this debate, the choice is to increase PRSI rates, reduce benefits or change the payment model in a manner which asks employers to share some cost but also gives them control over the management of the cost. I know Senators share my concern about high absenteeism rates and their impact on productivity. One of the key aspects of the proposed reform is that it will give employers in the private and public sectors an incentive to manage absenteeism. In addition, it will reduce administrative costs in the Department of Social Protection. Approximately 300 of my staff deal mainly with processing sick pay claims. These employees would be much better employed in trying to combat fraud within the social welfare system by carrying out inspections and checking that those claiming social welfare and employers are properly accounted for within the Department's system.
I stress that these reforms apply as much to the public sector as they do to the private sector. Senators probably do not realise that my Department pays for the sick days of persons employed in the public sector. For example, it pays for the sick days of employees of the HSE. The statutory sick pay proposal emphatically does not provide for a transfer of the cost from the public to the private sector. Given that the private sector ultimately funds the public sector, either through taxation or other charges such as PRSI, this criticism does not stack up. We are trying to change the culture of absenteeism and there is broad agreement that this is a matter we should address. In the long term tackling this culture will be beneficial to both people's health and the economic well-being of the companies for which they work. Those who have been involved in managing or employing people will recognise this fact. If some individuals are seen by their co-workers to be taking more sick days that would otherwise be considered the norm, this can give rise to difficulties. If the Government is paying, the private sector is also paying — it is just that the payment is routed through Government channels.
Usually, the cry from the private sector is to define collective services narrowly and minimise State involvement. The logic behind this is to allow private businesses and individuals to manage their own affairs to the greatest extent possible. There is normally praise for reforms which minimise bureaucratic overheads in order that the overall cost will be reduced. Obviously, an issue arises with the capability of small enterprises to fund sick day payments, particularly in the context of exceptional cases involving prolonged absences in respect of serious illnesses. There is some merit in the State providing an insurance mechanism for collective cover. The key question is when this cover should kick in. Under the proposals under consideration, it would come into play at four weeks. This would be at the lower level in our peer countries and, therefore, provide an earlier and more comprehensive form of collective cover compared, for example, with the United Kingdom in which state cover kicks in at 28 weeks.
In view of its low corporation tax and PRSI rates, Ireland remains a very friendly place in which to do business. There is a need to consider the examples of the Netherlands and the Nordic countries. These states have good welfare systems which provide people and employers with support when they need it. In some ways, during the Celtic tiger era it was possible for Ministers for Finance to introduce many increases to cash payments. There is a need, therefore, to consider how we might spend the more limited funds at our disposal now as wisely as possible in order that they might benefit people in the most effective way. We must also introduce reforms which will bring the provision in this country — as is the case with the proposal to which I refer — into line with the lowest level in our competitor countries.
In addition to focusing on expenditure, it is essential to reform and transform the system of social protection. In the past increased expenditure on social protection was focused on increases in rates and expanding the number and size of schemes. The system has become increasingly complex. Consequently, it is difficult to understand for those who need to engage with it and inflexible for those who administer it. I would like us to put in place a system that is easier to understand, more flexible to administer and amenable to change, both as the economy changes and contingencies arise. While the system provides a basic level of income support, it does not sufficiently enable or encourage people of working age to get back to work, or, in the absence of jobs, return to education or training.
The system is fostering a culture of welfare dependence rather than one of economic independence, self-direction and self-determination. The replacement rate or the proportion of their former wages that unemployed persons receive in benefits has increased in the case of some recipients to levels which may discourage them from seeking work. In providing and retaining an all-encompassing safety net we have taken away choices and opportunities. As with so many matters relating to my portfolio, we need to strike the correct balance between social protection and encouraging initiative, employment and economic independence. Necessity is the mother of invention and we want to empower people to explore solutions in meeting their own needs. This will not happen in adopting an open-ended approach to providing payments. As the recent NESC reported points out, the social welfare system has been passive in providing much but demanding very little in return. We must turn this around in order that entitlement to support will be based on a commitment to prepare for future opportunities in a timely manner and to grasp those possibilities when they arise.
The Government has taken the first important steps on this path, including, for example, the introduction of the JobBridge scheme. I am pleased to report that over 2,500 people are now involved. Employers and host organisations have offered a further 2,500 plus individuals opportunities to participate in the scheme which is a work in progress and we are only in week 21. However, the feedback is extremely positive and the scheme has given opportunities to people who could not get jobs because they were not in a position to gain experience. However, JobBridge is not perfect and I have taken into account all the comments Members of both Houses have made on it. The scheme is under constant review in order that we might identify ways to improve it. We have taken a great deal of feedback from host employers and organisations and those participating in the scheme.
JobBridge represents a small but valuable addition in providing opportunities for particular types of people. I refer to individuals who recently emerged from different levels of education or training or those who previously worked in the construction industry and now want to try to change careers. I was happy to be involved recently with a Skillnets programme for engineers. As a result of the downturn in the construction industry, the opportunities for engineers have dried up. However, the Skillnets programme to which I refer allowed a number of them to retrain and they have now embarked on new career paths with companies which produce medical devices. I am sure Members can think of other examples where we will be able to help people who have very good work experience and education but for whom the construction industry is not there any more in the way it was during the Celtic tiger era.
My Department is carrying out a major transformation and changing the way it does business. A number of services are being integrated into the Department. Responsibility for the office of social inclusion transferred back to the Department in May 2011. The community welfare service transferred from the HSE to the Department on 1 October 2011, which involved 1,000 staff.
The FÁS employment and community services will formally join the Department on 1 January, and very detailed preparations are under way to ensure this deadline is met and that the transfer of services and staff is as seamless and smooth as possible. Senior managers in the employment and community services side of FÁS have already begun to transfer to the Department and almost 700 staff have been identified as transferring in total. The remainder of the staff will stay with the new organisation, SOLAS, which will take over the education and training functions of the old FÁS.
Once the FÁS employment and community services people join the community welfare officers at the Department, we will try to build a single point service or one-stop-shop where people who have become unemployed can come to claim a benefit or support from the Department and be encouraged to enter a process where they receive advice, options and opportunities, particularly with regard to education and training to get back into the job market. We all know the job market is very difficult at present but none the less there is a churn of jobs and it is very important that those on the register have as much opportunity as possible to take up this employment. Following the integration of the FÁS and community welfare officers, we hope the national employment and entitlements service will commence in April. It is important we get this to work.
I am also very conscious that the Department must develop a service for employers. One constantly reads of situations in the newspapers whereby an employer has vacancies but finds it difficult to fill them. We must improve contact between the Department and employers. I am pleased to say I recently held the first stakeholder meeting between the various employers organisations and the Department to discuss how we can work together.
I am also examining a situation which many Senators have mentioned on occasion, which is the classic situation of people who obtain work for several days or weeks and are concerned about taking it up because they must sign off and feel they may return to the bottom of the queue. I believe it will be possible to work out a new system of suspending payments so if one obtains work for four weeks, one can e-mail or text the Department to suspend the claim and when one returns, one will not have to start all over again at the back of the queue for applications. This is something departmental staff have identified. I have visited quite a number of social welfare offices to speak to staff and meet people at the counters to find out what would help those on social welfare to get the jobs that are available and assist them and employers.
Ba mhaith liom córam a ghairm.
Notice taken that 12 Members were not present; House counted and 12 Members being present,
A number of other developments in the Department are ongoing. A group is examining child and family supports which hopes to commence an examination of the position of self-employed people when it comes to social protection. As Members probably know, self-employed people are entitled to pay a contribution of only 4% which entitles them to the old age and widow-widower pensions. Self-employed people are quite interested in becoming contributors and having their entitlement to other benefits examined. We will have to examine this carefully and consider the cost involved. Self-employed people would have to pay a greatly increased contribution. I know many self-employed people who may have been employed previously would like to move to this system. I have asked the working group on the integration of tax and social welfare to commence examining it shortly as a matter of priority.
I have also spoken about measures to tackle, reduce and eliminate social welfare fraud. The majority of people who claim social welfare are honest and claim no more or no less than their entitlements. Some people are abusing the system, however, and in terms of the social contract and the social support and understanding of social welfare, it is very important that those paying PRSI, PAYE and tax have confidence that the money they contribute to the social insurance system is spent in a way that is directed at and supports the people who need it.
The fraud initiative I announced in September seeks to target specifically at-risk areas and together with the Garda, Customs and Excise, the Revenue Commissioners and the taxi regulator, we have run joint initiatives called "feet on the street" to check people in the taxi industry are registered properly for tax and social insurance. We have also initiated an ambitious programme of visiting employers to see that all the employees are fully registered for tax and PRSI, and this has been welcomed by many legitimate employers who are in competition with people who are partially or wholly in the black economy. We have received a very positive response from employers throughout the country to this.
Social welfare inspectors visit people in their own homes to check that people are properly in receipt of the benefits or allowances they receive. It is a very big reform agenda. I stress again that the Department is spending more than €20 billion of citizen's contributions in tax and PRSI and it is important we get value for that. We have an ambitious target of building a welfare state of which we can be proud, that is friendly to business, that is absolutely supportive of both employees and employers, that gives value for money and, in particular, is supportive of older people when they retire. In regard to people of working age, say, those between the ages of 18 to 20 up to the time they retire, it is important we have a range of measures in place in order that, if they become unemployed or unable to participate, they are encouraged to develop their economic capacity, be economically independent and take up options in education, training and work experience. This means we will be conscious that social welfare is a hand-up, not just a handout, and that, ultimately, as the economy recovers, and it will recover, they can then get a job and become financially independent for themselves and for their families.
This is the goal to which most people aspire. When children are in school, this is what they expect — that they are going to be somebody, whether working in a shop, as a fireman or a policeman, as a scientist or otherwise. If primary schoolchildren are asked what they want to be when they grow up, most of all they want to work and be financially independent for themselves and for their families. That should be the aim of a modern welfare state — to be supportive, enabling and empowering of people to be full participants in our society.
Cuirim fáilte roimh an Aire. I welcome the Minister to the House and thank her for her comprehensive review of the current state of her Department and of her various initiatives. I also thank her for the clarity she has brought to a number of initiatives, especially the one that is now proving the most controversial in regard to employers' obligations to provide sickness cover.
To put all of this in context, this side of the House has been regularly accused of all sorts of nefarious activities. One area where I feel this criticism is somewhat misplaced is that Fianna Fáil tripled expenditure on social welfare from 2000 to 2010, when resources were available. We continue, as a party, to emphasise the need for a safety net for the most vulnerable in society and those affected by the economic crisis across Europe.
It is worth making the point that the troika, in the commitments the Government has entered into, has made it clear repeatedly that it is a matter for the Government itself to take individual initiatives so long as they comply with the overall budgetary requirements. This is why it is important to put on the record that the continuing criticism of Fianna Fáil in this area is becoming a little tired, because it is now becoming apparent that the Government will have to finally take ownership of the budget and the Exchequer, and, as a result, it is now finding the reality of Government is beginning to set in after a very long honeymoon period.
I take some umbrage at a quote outlined by my colleague, Deputy Barry Cowen, in the other House during a debate on a motion earlier this month, a quote the Minister had made at the MacGill summer school in Donegal that Fianna Fáil was cynical in increasing benefits and rates for electoral gain. That is quite extraordinary when one considers the joint manifestos of both Fine Gael and Labour, which were not at all shy in putting forward their own proposals to improve social welfare rates.
Having said that, there are a number of issues I wish to deal with in the time available to me. In light of the comments that have been made, it is a pity the Minister cut the fuel allowance, the electricity allowance and the gas allowance for the elderly. One can only imagine the deprivation that will impact on the most vulnerable in society coming into the winter and early spring.
The Minister stated that the replacement rate or the proportion of their former wages that unemployed people receive in benefits has increased in the case of some recipients to levels where it may discourage them from seeking work. I would be grateful if the Minister could outline what she plans to do in this regard. The figures pop up every so often in the tabloid press, although I believe most of the press in Ireland is now becoming tabloid. How can the Minister implement measures that will encourage people to seek work when there are very generous benefits?
There was definitely an environment over that ten-year period in which all political parties, both in government and outside, took the view that while we had the resources, we should look after the vulnerable. The former Minister, Deputy Ó Cuív conceded much the same and even this Government will agree it, too, has a commitment to ensuring the vulnerable are protected. As a result and despite or in spite of what I said earlier about Fianna Fáil's record in this regard, I would put my hands up and state in a personal capacity that I consider we spent too much and raised the level of expectation too high. One statistic relating to this is that from 2003 to 2009, the social welfare increases were of the order of 300% at a time when inflation was only 19%. If there is any lesson to be learned in the hope that we do get out of this, it is that future Governments will not be tempted, because they may have the resources, of going down the road of perhaps over-egging the pudding in that regard.
As the Minister knows, there is another school of thought that would argue it was right and proper that the more vulnerable in our society would have been looked after and that when we had the resources, we would have paid it. In addition, there is no doubt that the level of poverty overall reduced during that period, as even Fr. Seán Healy would concede. I would be anxious that the Minister would elaborate on how she is going to square this circle. While the Minister might correct me if I am wrong, I understand a married couple with two children, because of the available benefits and depending on their own individual circumstances, would be entitled to something of the order of €38,000 per year in State benefits, which comes very close to the average industrial wage. If any of us were in that situation and perhaps did not have the inclination to seek work, human nature being what it is, would we bother?
I am particularly pleased that the FÁS employment and community services will formally join the Department on 1 January and that detailed preparations are under way to ensure the deadline is met. This brings me back to a debate we had earlier today with the Minister of State, Deputy Jan O'Sullivan, who outlined a number of initiatives in the area of trade. One of the points that struck me was in terms of the joined-up thinking between Departments in the context of trying to provide more job opportunities. Will the Minister have a role in the following specific area? She referred to attending a dinner in the Irish Embassy in London in early October when representatives of 52 Irish construction companies were present. As she knows, because of the momentum created by the Olympic Games coming to London, a significant number of Irish construction companies are providing a significant amount of employment. Sadly, in one sense, but perhaps positively in another, an increasing number of those who worked in the construction industry here, now that it has collapsed, have managed to find work in London.
Before people go down the road of saying I am encouraging emigration, I would subscribe to a view that is becoming increasingly more apparent. There was a very fine article inThe Irish Times about this a couple of months ago where the writer took Mr. Colm Tóibín to task for making a comment at the global economic forum in Farmleigh that emigration was “a tragedy”. Involuntary emigration is a tragedy; there is no question about that. I was an emigrant; I had to leave. However, voluntary emigration is different. My own daughter, who is 23 years of age, left with a masters degree. She would not have been able to get work here but she and a number of friends said they wanted to travel for at least one to two years to gain experience, and they want to come back. They are not, in my sense, of the traditional emigrant pattern.
It is sad I do not have the time to develop other issues but this is one on which I wanted to focus. I suggest there are young people in this country who perhaps, for whatever reason, do not have the capacity to look for work or who may not know where to go. Will the Minister consider having a discussion with her colleague, the Minister of State, Deputy Jan O'Sullivan, and the Department of Foreign Affairs and Trade in the context of the Minister and the Department of Social Protection taking over FÁS and the employment and community services, given she has referred to the fact it will be setting up a service for people to establish benefits, look for a job and seek advice on their training options? Perhaps the Minister might consider integrating with British companies? One can get to London faster than one can get to Leitrim. If people on the Minister's radar are looking for job opportunities, perhaps her Department might join with our embassies, since work is available.
There is also work in Ireland for high-end graduates and those with specific skills. This is evident from websites such asirishjobs.ie and so on. We are importing people. While there was an outflow of 42,000 people last year, 25,000 people came to Ireland. The Minister will empathise with the points I have raised, as she is focused on trying to get more people into work.
I regret that I do not have more time and I am grateful to the Leas-Chathaoirleach for indulging me, but I will take just 20 seconds further. According to Spotlight: Tackling Social Welfare Fraud, research "suggests that the benefits system needs to change to accommodate more flexible employment patterns and ease the transition for people in temporary jobs to come on and off benefits". The Minister seems to have expressed this sentiment. What are her opinions in this regard?
I welcome the Minister to the House. She raised many important issues, some of which I will address while addressing other more general points.
The Department has two important roles. First, poverty is an increasing factor in society and the State must try to ensure every person has adequate income and resources to live with dignity. Second, the Department must ensure a balance between social protection and the incentive to seek and gain employment. The Government must rebuild a broken system. It is a big job. Ireland is perceived as a welfare state, but the rankings of the EU 27 place us considerably below the EU average. The figures do not support the perception.
I wish to address the statutory sick pay proposal the Minister mentioned. She has opened a good debate, but she is not going about it the right way. It is valid that she is trying to tackle absenteeism, but forcing the employer to pay for the first four weeks of an employee's sick leave will kill the goose that lays the golden egg. The employer is the source and creator of jobs. Employers are the multipliers and should not be crucified. Throughout the country, small and medium sized businesses are struggling.
In recent days, an employer of seven employees told me that they gave €7,000 per month to the Exchequer between VAT, PAYE and PRSI. When the employer called the seven employees in, they were told that they would be let go and that the employer would become a sole trader if the Minister's proposal went ahead. The Exchequer would lose money.
Other employers have approached me. One told me that he would be in a position to create 50 jobs in January, but that he would now add them on a subcontract basis. The Government will need to pursue these subcontractors for PAYE and PRSI. It is right to tackle absenteeism, but the Minister is going about it in the wrong way. I have a number of proposals. The Minister will drive business underground, which means more people will be pursued for fraud. The Department is doing wonderful work in that respect already, but let us not bite the hand that feeds us.
Absenteeism costs business €1.5 billion per year. This is a significant problem. Average sick leave in the private sector is six days per year. Average sick leave in the public sector is 11 days per year. The Minister outlined how her Department pays for the HSE's sick leave. This is outrageous. Who should pay for sick leave? Let us face up to it. Surely the employee has a responsibility. The Minister referred to the Dutch model, but we should consider the Swedish model in which the employee, both public and private, pays for the first day of sick leave. Could the Minister draft figures on this proposal? What would it save the State? What if the employee paid for the first three days, after which sick leave would be certified and the State or employer would have some duty?
Let us be careful. Our greatest problem is unemployment. Let us not kill the goose that lays the golden egg. It is important that the Minister examine the Swedish model. When employees were made to pay for the first day of sick leave in the public service, Sweden's absenteeism rate reduced by 40% in one year. In the private sector, absenteeism almost disappeared when an employer gave one week's bonus at Christmas for not being absent. Many good measures can be found, but the Minister's is not the right one. I say this respectfully.
Some employers go bust, become unemployed and have no social welfare. What supports can the Department provide for them? They have paid their employer's PRSI. I employed six people for several years. It was unbelievably difficult. I needed to generate business and go out on the front line to deliver the business, but I was the one doing many books at the end of the week because I could not afford to hire someone to do them for me. For these reasons, I see no merit in the sick pay proposal.
An employer who pays S class social insurance might find himself or herself injured or ill through no fault of his or her own, for example, as a result of a car accident. That person would receive no payment until he or she became eligible for the old age pension. Will the Minister explore the UK model, a matter to which I referred in an Adjournment debate? That model allows the self-employed to become employees in certain situations to pay PRSI contributions. This offers them protection when they are injured or ill.
I refer to employment traps that may deter an individual from seeking or acquiring employment. I am pleased that the Minister mentioned one of these, that is, seasonal employment. When individuals finish their employment, they are sometimes left without social welfare for a number of weeks. As the Minister is working on this matter, I will say no more.
Rent supplement is a large trap. A person who receives this benefit has his or her rent paid by the State until such time as he or she gets a job. The rent is then paid out of his or her income, however small it may be. This makes no financial sense for many. However, if the supplement moved to a differential rent system, this situation would be alleviated. After six months of accepting the benefit, only a proportion of a person's total income would be taken. This is what local councils do. It would end the dependency on rent supplement, as the person would only lose in proportion to his or her income. The Minister might consider this proposal.
Long-term unemployment is a major issue. Fr. Seán Healy and Social Justice Ireland have developed a worthy proposal. People want to work. During the Celtic tiger era, the unemployment rate was 4%, of which 1.3% constituted the long-term unemployed. Fr. Healy's proposal is with the Minister. It would create 100,000 jobs at a cost of €150 million to the State. The Minister should consider his proposal. Jobs would be created in the public, community and voluntary sectors with no displacement, people would be paid at the going rate and they would work a maximum of 19.5 hours per week and on a voluntary basis only. There is a great deal of evidence in Galway that people want this. Solicitors, accountants and other professionals have told me that they will work for their social welfare payments if the State provides appropriate opportunities through JobBridge and so on. Not everyone on those programmes will cut grass or paint walls. For example, community welfare officers are burst, so to speak, and need help.
I have a final point on pensions.
The Senator should be brief.
The programme for Government indicated that €800 million would be made up through pensions. The pension levy is expected to earn the State €1.8 billion over four years. If we reduce tax relief on pensions, we will kill off the attractiveness of investing in a pension that is good for the State and individuals. Life expectancy is now longer and if we decrease the tax relief on pensions from 41% to 20%, we will almost make them disappear. I have evidence that pension advisers are now finding it difficult to convince people to buy pensions. We would be cutting off our nose to spite our face.
The Senator is well past the time limit.
How could a person be incentivised to invest in a pension if that person only gets 20% tax relief going in and must pay 51% coming out. That is the current position. I would be delighted to hear answers to my questions.
I thank the Minister for coming to the House so swiftly to discuss the issue of sick leave. Senator Quinn is here today and as head of the Superquinn chain he was one of my great mentors as he had one of the great cultures of employment here. I am one of the few employers in this Chamber. I am dismayed at this proposal and the haste with which it seems it will be put through. Will the Minister in her response tell me how many employers were directly consulted by her Department before making this public earlier this week inThe Irish Times? My fear is that civil servants, the vast majority of whom have never employed anyone, have dreamed this up and are treating it like a simple accounting exercise. At a time when we are meant to protect jobs and try to create employment by attracting companies, we will put another black mark against our attractiveness and the cost of doing business in Ireland. If the Minister carries through with the proposal as it is, jobs will be shed and businesses will be forced to close in the long term.
I will provide a quote from an Irish Small and Medium Enterprises Association of Ireland press release from earlier today. It states "If the proposals on sick pay and redundancy rebates are introduced, it will cause untold damage to the smaller companies and will result in company closures and significant job losses." There is an indication that the Minister would be better off giving business owners an opportunity to trade out of the current environment and focusing her attention on the significant level of absenteeism within the public sector and the inefficiencies within her Department.
Of the 230,000 small businesses employing more than 900,000 individuals, less than 30% could currently afford a sick pay scheme. Of that 30%, a significant number could only afford to maintain a partial scheme. It becomes obvious, therefore, that introducing mandatory sick pay on top of other costs being foisted on companies through State-controlled increases in transport, energy and local charges will be the straw that will break the camel's back in many instances, leading to company closures and job losses.
My company in Newbridge has employed 100 people for 19 years. I had to make people redundant in 2008 but I thank God we have survived. Senator Quinn's Superquinn was my first customer in 1995 and he is a mentor. I have been very fortunate and I feel I have fostered a really lovely culture. We are very business-like, fair and friendly, and we look after our employees. Nevertheless, we are only human beings and I fear that if the Minister's proposal comes through, I would have some dormant couch potatoes among my employees. I wonder what will happen after a match on a Sunday. I could be one of those dormant couch potatoes as I am quite lazy and I would love a Monday or Tuesday off and to get paid for it. Senator Healy Eames mentioned it and the Minister might consider that the employee could pay for one or three days of the sick leave. That would restrain an employee from taking a Monday off. I joked that Mondays should not be included. I referred to some of the rather difficult employment laws and small businesses do not have the CIA, the FBI or Arthur Cox working with them. If there is a dormant employee who is not terribly ill, it can be very difficult to get such people back to work. I will not go into such details.
I will pick up on one point as the Minister stated that we are out of line internationally on sick pay. I am not great with Europe but I am very up to date with the UK because I have a company there. The cost base is significantly lower in the UK than here and although the employer does not make the initial sick payment, we are able to offset the cost against the PAYE tax bill later. This has less of an immediate cash flow implication as the payment would be £81.66 sterling for 28 weeks per week compared to €188 per week for two years here.
I welcome the Minister and thank her for giving her time in such a busy period leading to the budget. We know it is a tough and these are unprecedented times given our financial position. Unpalatable decisions must be made and we may find it hard to stand by such decisions, although we will do it in the interest of the country. However, there are a few issues I would like to discuss with the Minister to elicit the thoughts and reasoning behind them. That may help us to understand why the Minister feels such decisions must be made.
I add my voice to the concerns of people about employers having to pay the first four weeks of illness benefit to employees. As the Minister will appreciate, it is a very hard time for employers as well as employees, with many only hanging in there by the skin of their teeth. My fear is that this could cause widespread unemployment, as many employers will not be in a position to carry this extra burden. I am interested to know how the Minister believes this could be implemented and the logistics? Have there been negotiations with the social partners and where would an employer stand with employees who did not have the proper contributions to qualify for illness benefit within the Department of Social Protection?Would they still be obliged to pay this category of people and would it be seen as inequality in the workplace if they do not pay them?
Will there be a clause whereby employers can claim inability to pay? What happens the employee if the employers simply say he cannot afford to pay the illness benefit? What happens if an employee takes sick leave on several occasion during the year and will the employer be expected to pay the first four weeks on a number of occasions? I fail to see how implementation of this proposal could reduce absenteeism. If employees know that employers must pay for four weeks of sick leave, will they jet off on holidays while sending on sick certs? Will people go back to their own countries knowing employers must pay for four weeks? We recently reduced the VAT rate to help tourism and employers but this would have the opposite effect. I welcome the Minister's thoughts on the matter.
Currently, most employers are having significant difficulty with their rates and are seeking a reduction so how can we now be justified in putting this extra taxation to them, as that is how it will be seen? How can it be justified to put this extra burden on employers? I do not see how this will make a difference in the public system, and the Exchequer will still have to pay illness benefit. The private sector will be affected.
Currently, there is such a significant backlog in applications for social welfare that it is causing distress and hardship among the public. One lady applied for an invalidity pension last March and to date her application has not been dealt with, the Department officials indicating that they want to deal with people whose disability benefit is running out or who have no other income. She is constantly put to the back of the pile. This has a knock-on effect as she cannot apply for the household benefit package because she is waiting for a decision on the invalidity pension. Speaking of backlogs, there is a huge backlog in the appeals office as well. It is taking almost ten months for an appeal to be heard and this is causing a great deal of hardship. People are hurting. Perhaps the Minister will outline what proposals the Department has to deal with the backlogs.
I very much welcome the Minister's commitment not to cut the basic rates of social welfare in the forthcoming budget. People living on social welfare are among the poorest in society. It is a fact that the cost of maintaining a standard of living is higher in rural areas than in urban areas. If one has a child in third level education, for example, the cost to a person living in Kerry as opposed to a person living in Cork or Dublin is not comparable. A student from Kerry attending UCC or UCD will have to pay the cost of accommodation in addition to travel, which is crippling for parents and students alike. These costs are generally not applicable to students living in urban areas if they avail of the benefit of living at home.
Even the cost of the weekly shopping is higher in rural areas, as people do not have access to the larger shops or superstores. The small shops cannot compete with them so their prices are high. Many families have hidden costs, such as travel, which are higher in rural areas. For most people living in the country it necessitates the purchase of a car, which brings tax and insurance costs. People living on social welfare in rural areas have far more expenses than people living in urban areas. Most of them are barely making ends meet and it is imperative that they are left with as much disposable income as possible. It is important that those who can pay are made to pay, although I am aware that everybody must pay something. However, I trust that in the area of social welfare this can be done through reform and not through cutting the basic rates.
I very much welcome the steps the Minister has taken to tackle social welfare fraud. Programmes such as "Prime Time Investigates" show the extent of the fraud. I have a small suggestion that the Minister might consider. When somebody dies, their personal public service, PPS, number should appear on their death certificate. This would ensure there was no opportunity for others to use that PPS number for any other reasons.
Another issue that must be addressed is the domiciliary care allowance. This allowance should be extended to children up to the age of 18 years, as it causes untold hardship for both the parents and the child when they must apply for disability allowance at the age of 16 years. In most cases applicants are being refused disability allowance and inevitably their applications end up in the appeals office. If the domiciliary care allowance was paid up to the age of 18 years, the child would then be an adult and would probably have finished their schooling. Perhaps the Minister will consider that.
Notice taken that 12 Members were not present; House counted and 12 Members being present,
We are back in business. Senator Moloney has two minutes left.
I was delighted to hear the Minister say she is examining how to help the self-employed. Self-employed people are hard workers who provide an income for themselves, their families and their employees. They are staying off the live register. However, they pay a reduced amount of PRSI which means they are not entitled to illness benefit or jobseeker's benefit if they get sick or have no work. I suggest that they be given the option of paying the full amount of PRSI and if they decide to pay the reduced amount they must accept that they will not have entitlement to benefit when they get sick. However, if they choose to pay the full amount, they will have that entitlement. Why not give them that option? There are approximately 270,000 self-employed people in Ireland at present. The increased amount of PRSI could generate a large amount of income for the Exchequer as well. If self-employed people were given that choice, I am sure most of them would take it up. It is like an insurance policy.
Rent supplement is now under the auspices of the Department of Social Protection. My colleague will speak in more detail on that shortly, but I wish to make a brief point. It has come to my attention that the rent allowance is being paid directly to the tenant and in some cases it is not making its way to the landlord. The tenants then find themselves in arrears and facing eviction. It would make more sense if the rent allowance was paid directly to the landlord, with the tenant making up the balance of what they owe. Perhaps the Minister will think about this and consider changing it.
Will the Minister give us an update on the progress being made with the social services card? When is it likely to be in use? Will it contain a photograph or, as was suggested by a Senator on one occasion, a fingerprint?
I welcome the Minister. I am full of admiration for her grasp of her brief. Much of what she said was spoken off the cuff, rather than read from a script.
I now better understand her proposal about sick pay. That does not mean I support it because I was even more impressed by Senator Healy Eames's contribution. I understand that the Minister's objective is to reduce absenteeism. However, her figures will not be correct from the State's point of view if the payment is transferred to the employer. Where the employer is the State, there is a far higher number of sick leave days. That includes the Departments of Health, Justice and Equality and Education and Skills. The State pays for it. In those Departments there is an average of 11 days sick leave per year compared to less than half that amount in the private sector. That will not change under what the Minister proposes; it will remain the same.
I understand the Minister's objective is to deal with absenteeism, but we need a more imaginative solution. I was impressed by the suggestion made by Senator Healy Eames. It would be quite dramatic but if we told every employee that the first three days of sick leave must be paid for by themselves, there would be a huge drop, particularly in the number of Monday absences where people decide not to bother going to work after a hard night or weekend. That affects large and small employers.
I am really concerned about the use of such a blunt instrument, as described by the Minister, particularly for a smaller business. Take the example of somebody employing five or six people in a restaurant. There is one chef and if he or she is out sick, there is nobody to replace them. The business probably closes until he or she returns. There is also the example of somebody who has five or six employees, one of whom is a lorry driver. There is no way they can transfer one of the others to drive that lorry. The proposal, while I understand its objective, must be more imaginative if it is going to succeed.
I prefer the question of how we can help people to come off benefits. I have looked at other countries and in Britain, the Conservative-Liberal Democrat coalition Government introduced a work programme based on welfare reform similar to that introduced by President Clinton in the USA which is a payment for results contract with the private sector. More than 500 businesses and voluntary organisations in Britain have signed up to get people who have claimed unemployment benefit for up to a year back to work. The Government pays those contractors only when the worker has held down the job for a certain period. Chris Grayling is the Minister of State in the Department for Work and Pensions and he says it will transform the lives of millions of people and that it represents good value for the taxpayer as it bases payments to contractors on results, awarding much of the money to providers only when they find the jobseeker sustainable employment. Is the Government considering such a programme? It would be worthwhile considering it.
Businesses also complain that they do not have the right sort of people and that education provided by the State does not match business needs. In India, many leading firms have established in-house universities to teach the rudiments of their business and the Government there has asked industry to design one of the world's most ambitious attempts to close the skills gap. It has provided seed capital for an industry-led programme to train an incredible 150 million workers by 2022. We could do that here by attaching such a programme to the national skills development programme. We are a much smaller country but we should look at such models where the Government listens to the job creators. Jobs will be created by individual entrepreneurial businesses. They will not be created by the State. Jobs created by the State do not last in the long term and increase costs for those for those who could create jobs elsewhere. Start Up Britain, launched earlier this year, is trying to do the same as Start Up America. Edward Davey, Parliamentary Under-Secretary of State in the Department for Business, Innovation and Skills in the British Government, is preparing a comprehensive package of help for entrepreneurs that he calls "employment in a box" which he says will make it easy to take on the first employee in a new company. If we are not careful, we will not be able to encourage people to take on their first employee. Taking that first person is vital. If that works, the company can progress from there.
It is interesting to note the situation in other countries. Switzerland offers a good example for the child benefit system. Child benefit depends on the region where a person lives but it is usually around €150 per child per month, roughly the same as in Ireland. In Switzerland, however, in most regions child benefit is stopped for the third child and subsequent children. The United States has a similar system. In Ireland a parent with eight children will take home €1,322 per month, while in Switzerland a parent with eight children only gets €300 per month. It is not as if Switzerland cannot afford to pay similar child benefit to Ireland but the country has made the decision not to incentivise large families. I have five children so I am speaking against myself but given our financial situation, we must look at these areas.
I had a discussion with a secondary school teacher in a deprived area of Dublin who said many of his students are planning to have babies because of the benefits, housing and improved social status. It is easy to be facetious about this but these teenage girls are making a rational and economically sound decision and cannot be blamed for doing that. I am asking if benefits match.
Vouchers for food have negative connotations but we should consider every way to get the economy back on track. IBEC has proposed children's allowance be paid with an electronic card that can only be spent on goods here. It has been suggested that much of the money paid is not even spent in Ireland. I could be accused of coming from a tradition of encouraging people to spend their money in supermarkets but that is exactly where these cards should be used. Some of the money received in children's allowance payments is not necessarily being spent on children, the original idea for the payment. A certain number of well-off families use the money for holidays when at the very least the money should be spent in this country. IBEC's proposal has the dual benefit of solving what we want to do with children's allowance while giving a boost to the retail trade in Ireland. Perhaps vouchers could be linked to social welfare payments in the context of the reports that the Government is going to cut social welfare again at some point. Could food vouchers have a role in encouraging people to eat healthy food? Moody's Analytics in America has assessed different forms of stimulus and found that food stamps were the most effective, increasing economic activity by $1.73 for every $1 spent, with unemployment insurance coming in second at $1.62, whereas most tax cuts yielded far less than $1.
Those are just some suggestions. I am impressed by the Minister's grasp of her portfolio and the way in which she put across her ideas, but we must think seriously about some of these areas, particularly sick pay. We need something that is not such a blunt instrument.
Is trua nach bhfuil níos mó Seanadóirí anseo le bheith ag éisteacht leis an díospóireacht tábhachtach agus suimiúil seo. Is mór agam deis a bheith agam ceist a chur, cé gur trua é nach bhfuil deis againn ráiteas a dhéanamh mar tá polasaithe Shinn Féin iontach difriúil de pháirtí ar bith eile sa Teach seo.
Ba mhaith liom ceisteanna a chur ar an Aire i gcomhthéacs JobBridge. The Minister discussed the JobBridge scheme but there is a glaring anomaly in that scheme in that it is only applicable to those on jobseeker's payments and not to those on other social welfare payments such as single parent's allowance or disability allowance. It is grossly unfair that the attitude seems to be those people are not interested in getting back to work and are not being given a fair crack of the whip to be able to take part in the scheme. I have had cases like that in Galway where people have come to me and I have brought those cases to the attention of the Minister. This anomaly should be examined.
Does the Minister agree that rent allowance should not be cut given the over-supply of housing at the State's disposal through NAMA? Does the Minister believe social welfare cuts are counter-productive and that instead of cutting social welfare rates, investment in jobs is necessary? The Minister is aware that Sinn Féin has launched its pre-budget submission. It is a constructive document that has engendered a lot of debate and there are other areas in the social protection and general budget headings that we ask the Minister to take on board. If we had more speaking time we could go into detail on those.
I understand where the Minister is coming from because €775 million is the cost to small businesses for absenteeism. The small firms average is seven days, with a national average of nine days. As Senator Quinn pointed out, however, in the public service it is 11 days. If a person who is earning €30,000 takes eleven days off because he is ill, it costs €442 million, a huge cost to the State.
It has been found that stress is the greatest contributor to absenteeism, replacing back pain as the top cause. A survey carried out by the International Labour Organisation in 2002 showed 80 million lost working days in a year, with 14% of NHS inpatient costs and 25% of the cost of medication resulting from stress related illnesses in workers. If a survey was done in this country on illness caused by stress and what businesses do to provide stress alleviation and education, plus family responsibilities such as home care and child care, what would the results be? What would we save by looking at such areas?
I welcome the Minister. My questions are in respect of the rent supplement budget. I welcome the transfer of the rent supplement budget, announced by the former Minister of State at the Department of the Environment, Community and Local Government, Deputy Willie Penrose, and ask the Minister for Social Protection, Deputy Joan Burton, to expedite that as quickly as possible. There is no doubt in his evidence from the rental accommodation scheme that when people have the opportunity to work and pay differential rents they go back to work. My information is that will not happen until 2013. In light of that, I put the following to the Minister. I ask her not to interfere with the rent supplement limits paid to single people. The evidence of Threshold is that there is no property available at that cap and if a straightforward cut is given at that level there will be displacement, homelessness and people topping up rents out of scarce resources. I want the Minister to ensure that rent is paid directly to landlords, although I know that is not popular with her Department officials. However, our information is that 34% of landlords receiving rent supplement are not registered with the PRTB, therefore there is evidence of non-compliance with tax payments. I ask the Minister not to increase the personal contribution. Front line organisations such as the Society of St. Vincent de Paul and Threshold say that will result in poverty. Will the Minister please put some money in the budget for a new computer system for the Department of Social Protection? It is a well-known fact that their hopelessly out-dated computer system is the principal thing standing between the Department and some meaningful performance.
I welcome the Minister. We are all aware that significant benefits are going into many houses, particularly houses with large families, yet children in many of those homes are among the most deprived. Will the Department consider targeting some resources to help those families? Perhaps some of the suggestions made by Senator Feargal Quinn are worthy of consideration. It is appalling to realise that €700 or €800 per week goes into some houses yet the children are not cared for properly. In regard to the sick pay scheme I appeal to the Minister not to proceed along the lines she has suggested as it would be the death knell for small businesses in particular. While there is a major problem with absenteeism I suggest that a person on illness benefit does not receive any payment for the first three days from the Department of Social Protection. If the Minister were to consider three waiting days across the entire public and Civil Service, without any payment from the Department of Social Protection, what would be the saving to the State? A significant amount of money is involved. Some of the people in those positions are in secure employment and have been assured under the Croke Park agreement that they will not suffer any reduction in salaries. There is an opportunity to tweak the sick pay issue that might give the desired result.
I am interested in everything the Minister has to say. As I am not as well briefed as other speakers, I do not propose to repeat anything. I am involved in the legal industry and have been involved in the fashion industry and in two family businesses and I see the issue from all angles.
The legal industry, in particular, is struggling. It is hard to have any pity for the legal industry but as Senator Fidelma Healy Eames said, what applies in general should apply to the legal industry too. There is plenty of scope for employing solicitors on social welfare. I merely make the point. I strongly support what other speakers have said with a view to making life easier. Without employers, there are no employees to worry about being on sick pay or any other problems. First and foremost, we need to protect the employers so that we have employees.
I welcome the Minister and agree with most of what she had to say. However, given the number of calls I have received in recent days from people with small businesses there is major concern about the sick pay issue. I suggest that the Minister look at the issue again. It will be a case of sick pay or jobs. According to the people who run small businesses employing from five to 15 or 20 people they are very worried and experience a major problem with PAYE, VAT and pay for their employees. It is important not to kill the goose that lays the golden egg. I recognise that the Minister has a difficult role and that she has to achieve certain savings within her Department but perhaps she would go down the road of the first three days of illness, without payment from the Department of Social Protection, whereby employees would be responsible for themselves. I ask her not to go down the road of the sick pay scheme.
I do not have any other Senators on the list of speakers, therefore, I will ask the Minister to respond.
Please correct me if I am not right. Even though I spoke earlier, as there is still some time remaining I would be entitled to put another question to the Minister.
I could accommodate that.
I do not have a problem with that.
I wish to raise two issues in the context of the Government's commitments, one of which relates to the sovereign bonds. There was a suggestion earlier in the year that pension funds would be actively discouraged from investing in Germany and France and that they should be repatriated to Ireland to help the Irish economy. Are there any developments on what is referred to as partial capacity? The Minister referred to it here in the context of creating an integrated service providing a one-stop shop for people. This would mean that instead of having a whole plethora of benefits going to an individual there would be a one-size fits all benefit. Perhaps the Minister could bring some clarity that issue.
I invite the Minister to respond.
I thank all the Senators who made such thoughtful contributions on social protection. In his initial contribution Senator Mooney asked how to make work worthwhile and several other Senators referred to that also. He referred to a statistic of €38,000 per year of State benefits for a married couple with two children. The first thing to bear in mind is that these examples which crop up from time to time in the media are generally correct but they reflect a very small proportion of the people who are on job seekers' allowance. Normally what we are talking about is a couple with three or more children on rent supplement. Such a family could be in receipt of €38,000 or, perhaps, a little more if they lived in a more expensive area of Dublin where the rent supplement was higher.
A number of Senators raised the issue of rent supplement. Rent supplement is one of the key barriers against people taking up employment. I have spoken in the House previously of my preference for the local authorities — a matter to which Senator Aideen Hayden referred — to take over rent supplement as quickly as possible.
I stress that the Department of Social Protection has no expertise in housing. Housing is the function of local authorities and the Department of the Environment, Community and Local Government. There is fairly widespread agreement among all the political parties and Independents that we would have a better system if it was dealt with by the local authorities. That is the objective.
One issue was raised by Senator Fidelma Healy Eames and Senator Marie Moloney. There are a couple of different issues. One issue is that the rent should be paid to the landlord directly. From a social welfare point of view that is difficult to do because the relationship of social welfare is to the individual who has a social welfare entitlement.
The suggestion of a new computer system is very welcome given that we are dealing with around 50 to 60 systems with different levels of entitlements and one cannot look through them. We cannot make exact comparisons between people. In some situations some people have a greater advantage from the system than others. All I can say is that if someone is living on a sole income of €188 a week as a single person, that is not a huge allowance in terms of the cost of living here. However, we also have examples of families who can accumulate multiple payments and as Senator Quinn pointed out, these families may also be in receipt of substantial child benefit payments.
It is critical that we address the issue of rent supplement. We also need to know whether other Departments or agencies pay income supports to families. We do not necessarily get information from the HSE as to whether it makes payments to families. I suspect that some of the large amounts one sees reported in the newspapers from time to time are based on cases where, for instance, people within one family may be both claimants and carers. There might also be some children being fostered in the family and payments being made by the HSE. We do not always get that information. We do not have a system like the Austrian one, which is a single account, which can keep us informed of all the different payments payable by different elements of the state. In Ireland, payments would most likely come from the Department of Social Protection and some arm of the HSE. We do not have a system that can keep us informed of payments from different Departments currently and would only be able to get that information by carrying out an investigation. While our data protection laws do not necessarily allow Departments to share that information, it might be appropriate to provide for making it possible to share the information.
The transfer of responsibility for rent allowance payments to the Department of the Environment, Community and Local Government is very important. The big problem county managers have experienced is that when social welfare recipients go on the rental allowance scheme, the rate of default is quite high. Where people move from rent supplement to the local authority rental accommodation scheme, RAS, there is no problem if they get a traditional local authority house because they are on a direct differential rent. However, the difficulty for the local authorities is that in some cases people on a social welfare income do not get a traditional local authority house and they are falling behind in their rent payments. In some cases, people enter the household budgeting system operated by An Post and then back out of it. They commit to it when they get their tenancy, but back out of it.
We may need to look at legislation which will make a legally enforceable commitment to the household budgeting scheme when somebody takes up accommodation. The local authorities want the Department to deduct rent directly, but our famous computer system would not be able to do that because there are 88 different local authority differential rent schemes. There are also at least 88 different computer systems. It is not feasible to try to get the Department of Social Protection to undertake pretty much all of the public administration in this regard. The Department already handles a vast number of schemes which is part of the difficulty because the pressure on all the schemes is extensive. For that reason, the transfer of responsibility for rent allowance payment to the Department of the Environment, Community and Local Government is the right move, but we should provide greater legal status and enforceability to An Post's household budgeting system. This would be very helpful. Members are aware of how appalling it is for families who get into and build up thousands in arrears and that this brings an enormous complications to families and they become even poorer. It is also a big problem for local authorities.
Senators referred to large families on social welfare. During the Celtic tiger era here payments rose rapidly, but one difference between Ireland and other countries is that most countries with good systems have a mix of income supports and cash payments and services. For instance, I am looking into the back-to-school clothing and footwear allowance and considering whether some of it could be paid directly to the schools for a national schoolbook lending system.
This would, perhaps, be some version of the suggestion made by Senator Quinn to allocate the money to schools. This would then be spent locally and would give local businesses the opportunity to bid for schemes like the book rental scheme or the provision of school uniforms. There is merit in looking at the proposals that have come forward to ensure the money is spent on the children and in Ireland. That is a reasonable objective. Social welfare moneys amount to approximately 16% of the economic spend in the country. This is significant and important. In the west of Ireland in particular, the social welfare spend is probably an even higher proportion of the local economy. Therefore, it is important that we ensure that as much as possible of the social welfare spend is spent on the people who need the money, spent on children and spent within the economy.
On the issue of people in the United Kingdom keeping close to information on jobs in Ireland, as people who have used JobBridge know, it operates via a website. It has taken some time to get JobBridge up and going and for employers to appreciate that it works through a website and for people looking for internships to appreciate that. However, JobBridge is now working reasonably well. With regard to Irish people in London, it should be possible to develop something similar that will allow them to tap in to information about jobs at home. We need employers to put up information on vacancies and to be able to identify people who are not working who would be interested in and suitable for those vacancies. There are great possibilities in terms of using modern technology. I have met some of the people involved in some schemes in England and attended events around St. Patrick's Day and met a number of people offering this kind of scheme there. I also met the UK Ministers involved in these schemes. There is much food for thought in this, but we will not be able to do this until we get our national employment services unit up and going and until the Department integrates our traditional social welfare department, community welfare officers and the FÁS labour services people. If we achieve that integration — we have an ambitious programme for next year and people in the Department are working flat out — there will be many possibilities.
Many people referred to illness benefit. I stress again that some 20 million days are lost to illness each year. This involves handling 300,000 claims a year and takes up the time of approximately 300 civil servants, some of whom might be better employed working on how to prevent fraud, abuse and error in the system. We need to discuss the resource issue. People were concerned about small employers, but I did not hear concerns expressed about large employers who traditionally manage sick pay schemes and sick leave arrangements, whether in the public or private sector. If we are to introduce this, it will require legislation. There will be a detailed discussion. I will be anxious to ensure that the views of small employers in particular are taken into account. Small employers tend to manage illness and issues around it very well. As Senator Quinn indicated, issues arise in regard to illness management in parts of the public sector. What is the point of the Department of Social Protection being responsible for sick pay in the HSE or in other public institutions? We have no control over it. We just pay it. If we can get the management of an enterprise to be responsible for engaging with employees to ensure that illness and absenteeism is kept to a minimum there will be a tremendous gain in terms of productivity for the country in the public and private sectors. We need to have a conversation on the matter.
People, understandably, would like to see improvements, for instance, in how appeals are dealt with. Senator Moloney made an excellent proposal on the domiciliary care allowance; that it should move from 16 years to 18 years of age. Some years ago the then Minister, Ms Mary Hanafin, attempted to do that. At the time I was the Labour Party spokesperson on finance and I strongly supported the move because I know there are many people, in the organisations supporting parents with these issues and among parents, who want change. It would also assist people in being supported and staying on in school and maximising their education. There is a great deal of merit in the proposal. It is certainly something I will examine in the context of the budget and the changes.
Senator Healy Eames referred to Fr. Seán Healy and his proposals on generating additional employment places. There is also merit in that proposal. I strongly suggest to her that she might also speak to her colleague, the Minister for Finance. I am anxious to see those opportunities but they have a cost. All politicians, regardless of party, recognise the value to a local community of community employment schemes and other ways of activating people to contribute at local level. Years ago when there was much unemployment here we had social employment schemes. There is a great deal of merit in such an approach particularly in terms of local authorities and local work. In conjunction with the Minister for the Environment, Community and Local Government and the former Minister of State, Deputy Penrose, I have had many conversations about that, but we need the go-ahead from the Minister for Finance to enable those kind of schemes to restart.
We are working to achieve a structure whereby we simplify social welfare and end up with much fewer schemes, disregards, allowances and so on. People of working age who are being supported by the Department broadly fall into three categories of people — jobseekers, people on lone parent's allowances and those who may be ill or have a disability. In the current jobs market they have very little opportunity to get any kind of work even though very often that is what they would like. We must create opportunities in terms of the changes in the system. In an environment where the jobs market is extraordinarily tight we must create other opportunities for people. The jobs initiative that was launched in May has been very successful. To date, the outcomes from the internship scheme are extremely positive. I accept what Senator Ó Clochartaigh said about perhaps opening the scheme to others. The reason it is being confined to jobseekers is that it was the conditionality in regard to the initial IMF programme where extra schemes were created that would help to take people off the live register, namely, people on jobseeker's allowance.
One of the things we should consider for people who are parenting on their own is the approach taken in Scandinavia where the status of someone as a lone parent applies until his or her child has settled in school. After that one is considered a parent. The state does not differentiate between parents who are married or single. Parents and children are taken into account. If a parent is of working age and wants to get a job then all the opportunities are available whereas we tend to put people in a category of "lone parent" which lasts for a long period. We need to have a conversation on the issue.
The development of a lone parent support was in the context of this country 50 years ago. There was a stigma attached and the support for parents, especially women bringing up children on their own, practically closed down the institutions overnight. Now we have moved on. Irish society is different now to how it was in the 1950s and 1960s. Being a lone parent is often an individual's decision. Also, marriages break up and relationships form and re-form. We should consider developing our system in the context of how society has evolved. One of the things we need to do in that context is to look at Scandinavia where there is more child care and more after-schools services. I am concerned that the children of people who are parenting on their own would be seen in schools as being exactly the same as the children of parents who parent together, whether they are married or cohabiting. The focus should be on the parent and the child. To some extent the way the system has developed does not reflect the way society has evolved in recent decades. There is a great deal of opportunity.
It is one of the reasons it is unfair to discriminate against lone parents who want to get on the JobBridge scheme.
That is what the IMF and the OECD are saying to us; that people from the age of 20 to whenever they retire at the age of 65 or 66 are of working age and they may have particular needs because they are parents or young adults but that, essentially, we should provide a full range of opportunities to them in terms of work, training and employment opportunities but, equally, if they have needs because they are parenting that child care and after-school care is available. In Scandinavia, that is often where they put the money rather than to have large direct payments for families. It is a shift in the balance of how we provide support from the way it has evolved to date. That is something we need to consider.
Senator O'Brien mentioned redundancy rebates. I was very struck recently, as I am sure were most people, when TalkTalk closed down over a short period, with great personal distress to the workers involved in Waterford and the south east, and people were offered redundancy.
The officials from the Department went into TalkTalk and set up information sessions to ensure the poor unfortunate workers who were being made redundant at the click of a finger would get social welfare income support. This resulted in the social insurance system paying 60% of the redundancy cost. In other words, our system carried the bulk of the cost of transferring jobs in Ireland abroad. The figure pertaining to Dell was approximately €11 million. Senators should think about this. With regard to the 1,000 highly trained aircraft technicians in SR Technics in my constituency, the State picked up a large part of the tab — 60% — for their redundancy payments. This is the first year in which redundancy payments were dealt with in the Department of Social Protection. Previously, they fell under the employment remit. Some thinking must be done in this regard. Are we ultimately to pay a large subsidy for jobs to be transferred out of Ireland?
If a company has become insolvent or an employer has no funds, of course redundancy support is required through the Department, but we must consider whether the system is being used to make redundancy more attractive than it ought to be. I refer in particular to the wholesale transfer of jobs out of Ireland in the case of TalkTalk and SR Technics.
A meeting with the Minister for Jobs, Enterprise and Innovation is required because talks should be entered into with those companies that are at risk. If the Department paid out €11 million, it is madness.
The Minister is responding.
I am giving the Senators the opportunity to think about the circumstances to which I refer, particularly in the case of TalkTalk. This would have been the first time the matter was dealt with in my Department. Despite our trying to set up a task force to help the workers to have their entitlements as soon as possible, we were ultimately paying 60% of the redundancy cost. We need to think about that.
I have touched on many of the general themes. Senators Noone and others referred to the legal industry and the professional organisations that would appreciate taking on people.
I am not sure whether Fr. Seán Healy's proposal on jobseekers concerns the commercial sector. I got the impression it was——
Anyone on social welfare——
——for the community and voluntary sector.
Architects and solicitors are also on social welfare.
There is a lot of merit in examining that proposal. Many years ago, in the late 1980s or early 1990s, I believe, a similar scheme resulted in the development of special needs assistants in schools.
It was 1994-98.
We need to have a series of pathways. While people want to do something useful and gain work experience, there ought to be the balance we talked about during the JobBridge debate. We must ensure employers do not exploit the system and that people get an opportunity. Under JobBridge there is, in almost all cases, a good balance. I have arranged for the evaluation of JobBridge.
The cost of pensions was raised. I raised it as soon as I became Minister. I have asked for a very detailed study to be undertaken in regard to pension costs. There are grave difficulties, particularly with regard to defined benefit pension schemes. Senator Mooney asked about annuities. There are proposals being worked upon actively in relation to a kind of blended annuity with the support of the NTMA. The current turmoil on the markets is such that every time it seems some stability is established, problems become worse. That has been extraordinarily difficult for defined benefit schemes.
At 0% growth.
At the same time, there is approximately €74 billion in Irish pension funds. Irish pension funds, by and large, can put a small percentage into hedge funds. The latter take the bets against the euro and individual European economies based on their prediction as to how the bond market is likely to move.
It is better than putting it into Irish banks.
There is a profound argument that one should ensure we develop a system in which it is possible to invest in Ireland when certainty and calm have returned. All other European countries are considering this approach. In Holland, the amount in pension funds is approximately €800 billion. Therefore, there must be a way of offering investment opportunities. It may be partly through simple savings-type products with a low, but guaranteed, rate of interest. Pension funds are required to carry some such investments. We could try to design, perhaps with the support of the NTMA, investment capacity for infrastructure which carries a rate of return or rent that gives the investing pension fund the kind of return and security it requires. The €74 billion is, by and large, invested around the world. Relatively little is invested in Ireland.
It would create jobs.
We are going to set up a commission on the future of pensions because, after the crash, we will have to reconsider how best to protect people investing in pensions.
The issue of tax relief on pensions is not under my remit but under that of the Minister for Finance, Deputy Noonan. He is looking very closely at this. The IMF documents indicate that savings of up to €940 million could be made. The pension levy has raised €450 million. One of the proposals in the programme for Government is to provide tax relief on pension savings on investments which would yield an annual pension of approximately €60,000. This is a capping proposal rather than one that relates to rates. The Minister for Finance is examining such issues in the context of the forthcoming budget.