SELECT COMMITTEE ON FAMILY, COMMUNITY AND SOCIAL AFFAIRS díospóireacht -
Tuesday, 18 May 1999

Vol. 2 No. 3

Estimates for Public Services, 1999.

Vote 40 - Social, Community and Family Affairs (Revised).

Acting Chairman (Mr. Browne, (Wexford)

On behalf of the committee, I welcome the Minister for Social, Community and Family Affairs, Deputy Dermot Ahern, and his officials to this meeting to consider the Revised Estimates for the Department. I ask for co-operation, which no doubt I will get, in dealing with the Estimates in the most effective way, namely by keeping Opposition spokespersons opening statements to ten minutes each so that the committee will have an opportunity to debate the major issues involved within the individual subheads. Is that agreed? Agreed.

With the co-operation of the committee, I aim to conclude not later than 4.45 p.m. because there is another meeting at this venue at 5 p.m.

Mr. McGrath

Will the Chair please outline the format of the meeting? Will the committee go through each subhead page by page or what will be the format of the discussions?

Acting Chairman

No. I understand the format is open and members may raise any issue once the Minister has spoken.

Minister for Social, Community and Family Affairs (Mr. D. Ahern)

I welcome the opportunity of coming before the committee to discuss the Estimate. As the committee will be aware, the Estimate represents the investment by the State in the social, community and family affairs of the nation. Obviously this is not the full picture. Workers and their employers, through the social insurance system, provide a further substantial investment in the welfare of our people. In all, the Department will be spending more than £5.1 billion this year on the various social, community and family supports, an increase of more than £340 million or 7 per cent on last year's spending.

The net Estimate for my Department's Vote for 1999, excluding social insurance expenditure, is £2.830 billion. This is the sum provided by the Exchequer towards social assistance payments, including child benefit; employment supports measures; community development and supports for voluntary activity; supports for families; and administrative costs.

The 1999 Estimate represents an increase of £185 million or 7 per cent on the provisional outturn for 1998. This is due mainly to the cost of the significant improvements in the 1999 budget and the carry over costs of the 1998 budget changes. The improvements which we have introduced in the past two budgets mean the Commission on Social Welfare's target rates have been achieved, with all social welfare payments above that target. We have also moved half way towards meeting the commitment to increase the old age contributory pension to £100 a week over the Government's five year term of office.

This year, for the first time, the total expenditure covered in this Estimate relates solely to social assistance expenditure. This is because, as the committee will see from the figures, PRSI income exceeds projected expenditure; I will return to this issue later.

As in the case of the 1998 Estimate, the proportion of expenditure spent on unemployment payments has continued to decline significantly, with employment down by 58,000 since the Government took up office. Last month the live register figure dropped below the 200,000 mark for the first time in 16 years. The continued downward trend in the live register is evidence that our employment policies are continuing to pay dividends.

The 1999 Estimate provides for a reduction of more than 23,000 on last year's average live register, which will result in a saving of approximately £85 million. Due to the continuing growth in employment, to the employment supports being provided by my Department and FÁS and the measures being taken under the employment action plan, the live register reduction is ahead of target.

However, there is no room for complacency as the challenging task of assisting those still on the live register to become job-ready remains. While the social welfare system has, in recent years, been moving away from passive support for people who are unemployed to investing in employability, given the expected continued growth in employment in the coming years it is essential that we refocus our policies to tackle the changing nature of our unemployment problem.

Last year I set a target of increasing the proportion of unemployment spending on active employability measures to 20 per cent. I am pleased to let members know that, as a consequence of the additional employment support measures which will be introduced this year, this target is set to be exceeded with a total annual investment in employment supports of some £200 million, including the back-to-work allowance scheme, the back-to-education allowance, FIS, etc.

Social insurance is a key mechanism which has been put in place to give expression to social solidarity between different groups and generations. In essence, part of the wealth created during people's economically active years is used to provide pensions and other entitlements which are paid to workers when required, for example, when they retire or become incapacitated or unemployed. Employers also benefit directly or indirectly from the existence of these supports for their employees.

Social insurance benefits and pensions are paid out of the Social Insurance Fund, which is funded by PRSI contributions from workers, their employers and the self-employed. The Exchequer also makes good any deficit which may arise between income received by way of PRSI contributions and social insurance benefits and pensions paid out.

As the committee will see from the detailed Estimate, the income from PRSI contributions is projected to exceed social insurance expenditure and, therefore, an Exchequer subvention will not be required this year for the Social Insurance Fund. Social insurance fund income exceeded its expenditure for the first time in 1997 and the fund continued to be in surplus last year. Prior to that, the fund had funding shortfalls in each year since its establishment, sometimes amounting to more than 30 per cent. This was covered by subventions from the Exchequer.

The increase in the level of employment and improvements in the economic climate in general have directly contributed to PRSI buoyancy. It is projected that the social insurance fund will be in surplus again this year with a cumulative surplus estimated to be £115 million being realised by the end of the year.

This short-term surplus, however, cannot be viewed in isolation from the significant challenges which face the social insurance system in the medium to long term. The projected increase in the number of older people in society will result in significantly increased social insurance costs in the years ahead. The report of the Pensions Board on the national pensions policy initiative contains a number of major recommendations regarding social insurance pensions. These included a recommendation that steps should now be taken to establish an explicit mechanism to fund, at least partially, the prospective substantial growth projected in social welfare old age pensions. When that report was published I welcomed it and indicated that the board's proposal on part pre-funding of pensions deserved full examination. An interdepartmental working group is currently carrying out this examination and will report later this year.

The level and types of benefits provided by the system also need to respond to the rapidly changing social and economic environment. I have already indicated to the House that it is my intention that a possible role for social insurance in supporting people who leave employment to care for another person or a further PRSI benefit arrangement for care recipients needs to be explored. These issues will be progressed by my Department during the course of this year.

While the financial position of the social insurance system is secure in the short-term, any decisions on the current surplus must have regard to the very significant financial challenges of the years ahead.

Funding for community supports is being increased by 7 per cent this year to £30 million. This includes funding for a range of grant schemes, for the Combat Poverty Agency, the National Social Service Board and the Programme for Peace and Reconciliation.

The Estimate also provides for an allocation of £6.5 million this year towards my Department's supports for families, including support for marriage, child and bereavement counselling services, family mediation services and community based family resource centres.

The total administrative costs of my Department will amount to £257 million this year, about 5 per cent of total expenditure. This is in line with previous years.

People tend to think of social welfare simply in terms of payments to unemployed people. The total expenditure provision in 1999, including spending on social insurance benefits, is broken down as follows: old age - 24 per cent; widows, widowers and one parent families - 18 per cent; unemployment - 16 per cent; illness, disability and caring - 14 per cent; child related payments - 10 per cent; employment support - 4 per cent; other schemes, including community and family supports - 9 per cent and administration - 5 per cent.

This Estimate, the second I have presented to the committee, is a strong indicator of this Government's commitment to the establishment of an inclusive society, a society where the structures and systems of the State serve all of the people.

I commend this Estimate to the committee.

Acting Chairman

After all that good news, I call on Deputy McGrath on behalf of the Fine Gael Party.

Mr. McGrath

Is the Chairman suggesting that I will not give good news? We created 500 jobs in Mullingar this morning and Westmeath won the under-21 football competition on Saturday. We are on a high. I hoped the Minister would be able to give us better news. The bad news is that our spokesman on social, community and family affairs, Deputy Jim O'Keeffe, is away on urgent party business and sends his regrets.

I welcome the opportunity to discuss the Estimate for the Department of Social, Community and Family Affairs. I am surprised that in the document we received to brief the select committee, the figures for 1998 are only provisional at this stage. The figures should have been finalised by May of the following year.

I welcome the fact that the Minister has set out in detail the breakdown of total expenditure within the Department. Often there is a perception that social welfare money goes specifically to single parents or another such sector which people wish to criticise. It is a good idea to publish the figures so that people can see where the payments go. People criticise the expenditure of the Department but, when they are asked which items within the social welfare budget they wish to eliminate, they row back quickly. It is important to have this kind of information broken down in this way. As politicians, we should make a greater effort to publicise it.

The Minister outlined that the increase in the social insurance fund will result in a surplus of £115 million this year. That follows the increase in payments projected for 1999. The estimated increase in the social insurance fund is £160 million yet the Minister will end up with a surplus of £115 million. Will he explain why that additional expenditure of £160 million which the social insurance fund will take in is not being fully expended? The many groups in receipt of social welfare - people who have contributed to funds which they set up and into which they paid - will not get the benefits of that fund.

It is unfair that those who have contributed to the fund will not get the total amount of the fund available when there will be a surplus of £115 million at the end of the year. A man who visited my office yesterday is very disappointed with the social insurance fund and the way it is operated. This man was made redundant after 23 years in the same company in Mullingar. He will receive a redundancy payment of £37,000. When he went to sign on for his unemployment benefit, to which he is entitled having contributed class A stamps for 23 years, he found that, because his redundancy payment was more than £15,000, he will have to wait five weeks before he can sign on for unemployment benefit. It is strange and disappointing that someone who had contributed over such a long period should find this is the case. It was news to me that someone who had contributed for so many years should have such a penalty imposed on him. From a departmental point of view, the amount of money involved is small, a payment of £140 a week for him for five weeks only. It seems a strange situation. Can the Minister give an explanation of why that was introduced? It is very short sighted. It is disappointing for people who have contributed all their lives. When one considers the surplus in the fund, it is amazing that there should be such a condition.

Contributory widows pensions are at a low rate. These are pensions paid from the social insurance fund. This fund has a surplus. I have often said at meetings of this committee that widows are the forgotten people. We give them a pittance on which to survive. I know a 53 year old woman who is unable to work and is living on a widow's pension of £70 per week. How is she to survive? How is she to keep her house? If she sells it and moves somewhere else she may not qualify for the widow's pension. If it is a non-contributory pension she will not qualify at all. Surely we should be able to improve payments to such categories of people.

Another issue which has been brought to my attention in recent days is the rate of payment for VTOS courses. People on VTOS courses are being paid the equivalent of those on unemployment assistance. Their counterparts on FÁS courses are being paid £25 more per week.

Mr. D. Ahern

That is a matter for the Department of Education and Science.

Mr. McGrath

I will take up the issue with a different Department. I asked the Minister to examine a related matter and I wonder if he has had a chance to do so. The qualification procedures for obtaining places on FÁS courses, particularly for married women, rely on the live register. Some married women are not on the live register because of their husbands' income. Such people are not, therefore, entitled to take part in a FÁS course as they are not registered. Will the Minister speak to his Cabinet colleague to ensure married women in such circumstances get a fair crack of the whip? They are currently being discriminated against. Women in other categories can easily qualify for FÁS courses. Many women are annoyed that they are prevented from availing of the benefits of FÁS courses because of their husbands' income. These women are prevented from being on the live register because of regulations in the Department of Social, Community and Family Affairs concerning household income. Is there some way we can ensure equality of opportunity for all women so that we do not discriminate against married women who care for their families in the home?

The projected Exchequer surplus is £1 billion, yet there is only a small increase in social welfare payments across the board. In the past, the Minister gave records of increases and so on. In the 1980s we borrowed heavily, the country was in debt to a great extent, we had huge numbers of young people in school and in receipt of child benefit, yet we were able to provide larger increases in social welfare payments to keep pace with inflation. It is disappointing, therefore, that at a time of huge surpluses we are giving very small increases in social welfare payments.

When canvassing for the local elections people are legitimately asking us how one can survive on £70 per week. It must be horrendous for a widow to run a house and survive on £70 per week. The same applies to single or separated men in their 50s and 60s who live alone, of whom there are quite a number. These people have to pay rent. I know several of them who are seeking local authority housing, but they cannot get it because they are in a bracket which is not catered for. They have a meagre existence on £70 per week.

Mr. Browne (Carlow-Kilkenny)

I welcome the fact that less money is needed to pay unemployment benefit and the drop of 58,000 people on the live register.

I wish to raise an issue which is not entirely a matter for the Minister. Last evening I met a retired person who was angry at having to pay tax. I tried to explain that we have to pay tax on income. However, when the economy is doing well, perhaps those who have paid income tax for 40 years should receive a break when they reach pension age. It is hard to justify the payment of income tax to people who have more than looked after the State.

Will the Minister assist people who are trying to adopt foreign babies? I presume this is the responsibility of the Department.

Mr. D. Ahern

No, that is a matter for the Department of Heath and Children.

Mr. Browne (Carlow-Kilkenny)

It is unacceptable that people have been on waiting for visits from officials for 12 months.

The Minister gallantly increased the bereavement payment to £500 at the beginning of 1999. The estimated cost for 1998 is £960,000 and for 1999 it is £10 million. This information is on page 27. Is this £0.96 million compared to £10 million?

Mr. D. Ahern

The figure is £960,000; it represents a tenfold increase.

Mr. Browne (Carlow-Kilkenny)

I was fascinated as to why the increase was so little, but it is a tenfold increase.

Mr. J. Brady

I compliment the Minister on the pension increases in recent budgets. When he took office one issue which had been around for some time was that of self-employed people who had not contributed for ten years and lost out on the self-employed pension. I compliment the Minister on recognising the deficiency in that pension provision and on devising a scheme which gives half a pension to anyone who has contributed for more than five years. That is a welcome development. I also compliment the Minister and the Government on the reduction in the level of unemployment.

Acting Chairman

There seems to be a reluctance on the part of the Minister and his predecessors to increase the free fuel allowance. Perhaps the Minister might give us his thoughts on it. In rural areas, especially in Wexford but I suppose it is the same in every constituency, many old people do not avail of free travel because they do not have the bus services. Has the Minister considered a voucher system which could be used for taxis, private buses or for some other means of travelling in rural areas? Many old people who were born in Ireland and had to emigrate in the 1950s and 1960s make the point when they come home that they should be considered for some form of free travel. Has the Minister considered a system?

Mr. McGrath

Regarding incidental expenses incurred within the Department, I notice entertainment is listed for £36,000. What does that involve? Is it for launching of various schemes? More important, under the payment to An Post in respect of payment of social assistance, pensions and allowances, it is anticipated there will be a reduction of £400,000 in the cost. The Minister is no doubt aware of the controversy he is causing throughout the country by putting the payment of social welfare benefits up for tender. The postmasters' union recently issued a strong statement at its conference indicating that, if it loses this contract, it will have serious consequences for postmasters and possibly for post offices in rural areas.

We all know how emotive is the issue of services in rural areas, and State services cause particular difficulty for people in those areas. The downgrading of a Garda station, a teacher being lost to a rural school or the problem with post offices provoke a tremendous emotional response from local communities. If this contract is lost by An Post, there is great concern for the future of small post offices which conduct little business but would be the local contact point for the payment of benefits, be it old age or widow's pension or whatever, and a lifeline for many people in rural areas.

Will the Minister give details on his proposals for this contract and indicate if he has a preference for the service being kept within An Post rather than being given to banks, for example, which would not have the same network of services throughout the country as An Post? What will be the consideration of the Department when assessing the various tenders for the supply of the service throughout the country? It is an issue on which some time should be spent in discussion because it is important. I would like to hear the Minister's detailed response on subhead A8, payments for agency services. I am sure many of the Members representing rural areas will want to contribute and perhaps give the Minister guidance on how we believe the service should be directed.

Mr. D. Ahern

I hope I will be able to answer all the questions. If I leave any out, perhaps Members would indicate so to me.

Regarding the social insurance fund generally, Opposition spokespersons have made the point about the £1 billion surplus. The Government came into office based on a programme for Government in which we said all our election promises and our promises in the programme were predicated on the fact we would keep the increase in net current spending to 4 per cent. To date the Government has done that. Capital spending has obviously increased dramatically because that must happen in a developing economy. One of the reasons the economy got into difficulties in the 1970s and 1980s was because previous Governments allowed net current spending to increase dramatically out of all proportion to receipts. The 4 per cent increase in net current spending is one of the parameters within which the Government works. The Opposition would hop on us quickly if we were to begin to move away from the core principles under which the Government stated it would deal with the economy. The Minister for Finance and the Government are correct in the line they have taken on this issue.

The other aspect of this to which I have repeatedly referred and which specifically refers to the social insurance fund is that social insurance is not a simple matter of Deputy McGrath paying in a certain amount of money and receiving it in return. Social insurance involves one generation which is working putting money aside to assist those dependent in society. It is the concept of social solidarity and an intergenerational connection from a social viewpoint. It is working people caring for those dependent in society now and into the future. It must be accepted that there are those who will be obliged to contribute and yet may not receive any benefit, apart from the fact they will contribute to the betterment of society and, to a certain extent, spread the benefit of being part of a society which has social solidarity as one of its core principles.

In that context, the Government has taken the brave decision to care for the elderly, something we stated in our programme for Government. That is why we are increasing the maximum personal rate of contributory pensions to £100 by 2002, something we are well on the way to achieving. In fact, we are ahead of ourselves. We need only have given an increase of £4.75 in each of the five years. Instead, we gave £5 in the first year and £6 in the second.

The number of people over 65 is projected to grow from 11 per cent of the population in 1996 to 27 per cent in 2056. That is a dramatic increase in only 60 years. We will have to invest now for people's future and that is only for old age pensions. It does not take into account the need to invest in care for the elderly and the issue of caring for them in institutions or in the home. That is another aspect of which we must be acutely aware. It would be great for a politician to spend all this money willy nilly and without any reference to what will happen in 20, 30 or 40 years' time. However, people like me are passing birds. It is the Department which must take the longer view. That is what it is doing and I agree with that. The number of people of working age per person over 65, the old age dependency ratio, will decline from 5:1 in 2006 to 1:9 in 2056.

Mr. McGrath

I am not sure those figures are correct. I think there is a different interpretation.

Mr. D. Ahern

I should have said it will be 5: 1 in 2006 as opposed to 1.9: 1, or almost 2: 1. It is about 4: 1 at present but it will increase to about 5.1: 1 in 2006. Then it will decrease dramatically. To put it simply, it will be 5: 1 in 2006 and in 2056, it will be 2: 1.

Mr. McGrath

I respectfully suggest that those figures need to be clarified within the Department. The Minister's figures are not acceptable.

Mr. D. Ahern

The Department carried out an actuarial review as part of the national pensions policy initiative. These are the figures produced.

Mr. McGrath

I refer the Minister to a document produced by Mr. Tony Fahey of the ESRI for the Oireachtas Joint Committee on the Family, in which the present and projected dependency ratios are set out for the next 20 years or so. It does not make projections for 50 years. The figures are quite different from those the Minister quoted. In the interests of accuracy, the Minister might have them clarified.

Mr. D. Ahern

No. The Department's figures show that in the next ten to 20 years the position will improve but, subsequently, it will change dramatically. By 2056, only 50 years from now, instead of there being 400,000 old age pensioners, as is the case at present, there will be one million old age pensioners.

Mr. Browne (Carlow-Kilkenny)

One can calculate the number of old age pensioners if they all live for 50 years, but how does one calculate the size of families? Is it presumed that there will be a downward trend of only one child per family?

Mr. D. Ahern

The figure I am quoting purely relates to pensioners.

Mr. Browne (Carlow-Kilkenny)

No. One cannot quote a figure for pensioners if one does not balance it with a figure for people of working age. Are we not talking about the ratio of pensioners to people of working age, the number of pensioners depending on the number at work?

Mr. D. Ahern

The figure I am giving is 5: 1, five working people to one old age pensioner. If one was to add children to that, the ratio would obviously be somewhat tighter.

Mr. Browne (Carlow-Kilkenny)

I am asking whether there is a difficulty calculating the number of children who will join the workforce? How does the Minister forecast even 20 years in advance? There might be a different trendthen. Everybody might decide to have families of eight.

Mr. D. Ahern

That is a separate discussion.

Mr. Browne (Carlow-Kilkenny)

No, it is not. It is linked to this to a great extent.

Mr. D. Ahern

That is all based on actuarial calculations.

Mr. Browne (Carlow-Kilkenny)

There is no actuarial way to calculate the size of a family.

Mr. McGrath

This is something about which I have had a bee in my bonnet for a while. I hope we will shortly receive the report. We must quote the actual figures. The Minister is correct in that there were about 400,000 people over 65 in 1996. The projection is that in 25 years the number over 65 will rise to about 700,000. Those figures can be sustained based on the various projections.

The Pensions Board has not been taking into account or balancing on an equal basis what is happening to the whole demographic trend. Ireland is unique in Europe in that the Irish population is rising whereas none of the European countries is experiencing that same trend. Whereas the number over 65 will increase within that rising population, the number at the bottom end, that is, other dependants or schoolgoers, will decline in more or less the same ratio. Therefore, the total number of dependants, that is, senior citizens and children, will remain more or less constant. To get the dependency ratio, one must couple with that the numbers at work. Earlier the Minister quoted the dramatic increase in the numbers at work over the past ten years, from about 900,000 or one million to 1.6 million at present. That middle section of the population is increasing. When one sets the figures for senior citizens and children, who are the dependants, against the figure for workers, the dependency ratio actually improves over 25 years.

I agree with what Deputy Browne is saying, that it is difficult to estimate any further than 25 years from now. There was massive emigration in the early 1980s. In 1987, for example, 43,000 people left our shores as compared with a net inflow of 16,000 in 1997, ten years later. How can one project what will happen 50 years from now when things have changed so dramatically in the ten year period between 1987 and 1997?

In addition, there were trends in employment and unemployment, and the birth rate has changed. There are 75,000 18 year olds at present but there are only 48,000 four year olds. Why is that the case? How could we have predicted those dramatic changes in such a short time. There are fewer than 48,000 ten year olds. The population of young people is actually increasing slightly contrary to the predictions of the statisticians.

I am sceptical about projections for 50 years from now. The longest period for which one can make projections with any accuracy is 20 or 25 years. Outside of that it is difficult. Even within that period, it depends on the base year - for example, if one was to take 1980 rather than 1990 as the base year, the projections would be much different. We must review the figures for the dependency ratio. I will examine the report to which I referred and will come back to the Minister with them.

Mr. D. Ahern

One of the reasons we provided in last year's legislation for an actuarial review every five years was so that we could up-date the figures based on the trends. Even taking into account all the issues to which the Deputies referred, that is, the net migration, the decline in the number of children and the increase in the number of people at work, that is still the estimate for 50 years from now. That is the trend in every other developing country. Everything goes in waves. We are approaching the top of a wave and eventually we will fall down again, which is what has happened in Germany, Japan, the US and England to a lesser extent. That is what we are faced with and it is incontrovertible.

The latest actuarial figures, on which everything I said over the past while is based, are taken from the latest report which was published in September 1997, which is not very long ago. Obviously those figures must be looked at following the five year period from September 1997.

The issue concerning redundancy has existed for some time. A balance has to be struck when someone gets a redundancy payment of £37,000 and then expects the State to fund a weekly payment. A delay period was inserted to provide that a person who gets a large lump sum would eat into their own resources before they come to the State for support.

The 1998 outturn figures are provisional until they have been examined and approved by the Comptroller and Auditor General. We expect this examination to be completed by the end of the year.

I have said in reply to parliamentary questions that the issue of women qualifying for FÁS courses is being looked at by a working group, chaired by my Department, which includes representatives of the National Women's Council of Ireland, the INOU, ICTU, IBEC, the IFA, Congress of Centres for the Unemployed, FÁS, the Employment Equality Agency, Aontas and relevant Government Departments. We expect that review, which looks at the whole issue of access to labour market opportunities for women, will be completed later this year. There are exceptions to allow women back to the workplace. There is also a leaning to allow lone parents back into the labour market.

Income tax was mentioned. In the first budget of this Government, the Minister for Finance dramatically raised the tax exemption limits and in the last budget he made a significant change which will remove 15,000 elderly people from the income tax net. That was the largest number of people ever taken from the tax net. Normally budgets remove 8,000 people from the tax net, but in this case 15,000 people, a very significant figure, over the age of 65 were removed from the tax net.

Mr. Browne (Carlow-Kilkenny):

Those who are removed from the tax net never crib at the door. They take it for granted. I am talking about someone who has a company pension and who has contributed all his life. I know the argument is that it is based on income.

Mr. D. Ahern

It is a question of social solidarity. It cannot be expected that a pensioner in receipt of an old age pension and a substantial income from an occupational pension should not pay some income tax. They may have additional income and a line has to be drawn. There have been moves by all previous Governments to increase the tax exemption limits for elderly people and that was continued in the last budget.

I looked at the free fuel scheme in the last two budgets. I have always been of the view that it is better to give the elderly a larger increase which they will get for the whole year as opposed to the free fuel allowance, which is only paid for a portion of the year. When dealing with finite funds, a balance must be struck. I increased the exemption limit for free fuel from £15 to £30 in the last budget. That assisted some people. The Chairman was very interested in this and the committee asked me to increase the limit from £15 to £25, but I went further and increased it to £30.

It is a bone of contention that people cannot avail of free travel. My Department has looked at ways of assisting people, but we have not come up with any viable options. Free travel exists for State companies and for a number of smaller independent companies. We accept that there are areas of the State not covered by the free travel scheme and therefore people cannot avail of it. That is kept constantly under review. There is a review of the free schemes this year and that will be one of the issues examined.

When I travelled to London to meet emigrant groups we discussed free travel for people who live outside the State. They are very particular about this but it is not a simple issue. I thought it was when I first looked at it but it is not. If a concession is given to one sector of our nation, it must be given to other sectors. The only way to operate this is to deal with it at European level. Because there is no synchronisation of social security systems across Europe it will be difficult. In some states in Europe there is no free travel. Many old age pensioners look with envy at the free travel scheme in this State. It is one of the issues being examined in the review. I have addressed this issue by way of parliamentary questions. We cannot extend free travel to those who claim Irish citizenship without extending it to other groups resident in other parts of the world. We will, however, continue to look at the issue.

I assure the committee that the degree of entertainment I lay on for visiting Ministers and officials is minuscule.

I have spoken in the Dáil about post offices. A contract was awarded to An Post in 1992 for a five year period for the payment delivery system. Post offices pay 80 per cent of all social welfare while 20 per cent is paid through other means, such as cheque payments or electronic transfer. The contract was renewed in 1996 by the Government contracts committee which said it would allow an extension of three years on condition that it would be put out to public tender under EU procurement legislation at the end of that period. My officials will find the quotation in the conditions by which that was done. Part of that contract entailed an investment of £18 million by my Department in An Post to assist it to use greater technology in the delivery of that service. Over that eight year period, an investment of £18 million was made to allow the company to come up to modern day standards.

Under EU law, all large public sector contracts - anything over £150,000 - have to be put out to public tender. This contract is estimated in the region of £36 million. The question of putting out this contract to tender is being examined by my Department. Difficult legal and business considerations have to be examined. These issues are particularly complex and require indept examination and evaluation. I am acutely conscious of the representations made not only by the postmasters' union but also by Deputies and Senators from all sides of the House.

Deputies and Senators will appreciate that because these are EU procurement requirements, I, as Minister, must be conscious and wary of public comment on this matter in case I might prejudice one side or another. These issues are being examined by my Department in conjunction with the Attorney General's office whose advice we are awaiting. It is my view, and that of the Government, that the question of the post office network needs to be guaranteed. The Minister for Public Enterprise has been committed to this issue since she came into office and it is Government policy that we will do all we can to maintain the network of post offices throughout the country.

The Government contracts committee in 1996 approved the extension of the previous contract for a period of three years up to the end of 1999 on the basis that "after that time the contract is to be awarded following a competitive process, having due regard to the relevant EU public procurement directives". It is important that I give some figures in relation to the costings because they need to be understood. To deliver a social welfare payment through the post office costs from 70p to 80p per transaction. To deliver it by cheque costs approximately 15p, but to deliver it through electronic fund transfer costs in the region of 3p to 7p per transaction. Those are the differences we are talking about.

A number of groups have expressed an interest in tendering for this contract, as well as An Post which has let it be known in no uncertain terms that it wishes to tender for this business. There is no move by the Government to close rural post offices; the opposite is the case. The Minister for Public Enterprise has been adamant about that since she came into office. Recently, in either Carlow or Offaly, a post office was threatened with closure but reopened on the insistence of the Minister responsible. That has happened across the country. Deputies can take it that the Government will do all it can to maintain the post office network, but it is not an area for which I have direct responsibility. I have direct responsibility for social welfare only.

Mr. McGrath

The Minister has given such a vote of confidence in his party's deputy leader, the Minister, Deputy O'Rourke, that I wonder if he anticipates a change in leadership. Does he know something the rest of us do not? Is he consolidating his position? The Minister talked about the commitment of the Minister, Deputy O'Rourke, to keeping the post offices open but when I raised on the Adjournment the issue of the post office in my area, beside Athlone, I was ruled out of order. When I tried to raise it by way of parliamentary question I was ruled out of order also. The Minister, Deputy O'Rourke, has done nothing about the transfer of a sorting office from Moate to Athlone, with the consequent downgrading of the post office in Moate and a projected substantial loss of income to the postmaster in Moate. She said she could do nothing about it. To hear the Minister say that the Minister, Deputy O'Rourke, is committed to reopening the post offices is perhaps a vote of confidence in her for another reason.

I want to refer to the awarding of this contract and the effect it will have on the quality of service being delivered at consumer level in a city like Dublin, a town like Mullingar or any rural area. Many people in rural areas do not have bank accounts and they have difficulty operating an electronic transfer system. They enjoy going into the post office to cash their pensions. They meet people and have a chat while doing their business. They have confidence in the operation of the service through the post office. Will the Minister include in the terms of this contract accessibility of the service to people throughout the country? If he does not, we will face many difficulties. I know of a post office which closed under a previous Administration. It was located approximately seven miles from Mullingar. Every Friday morning, an old lady would hitch a lift on the side of the road to Mullingar to cash her old age pension. That is unacceptable. We cannot ask old people to do that. We cannot impose a service on them where they will not have access to post offices to cash their pensions.

In the tendering process, will the Minister examine availability of the service to the most remote areas? Westmeath is not too far from the centre of activity here in Dublin, nonetheless there are villages in Westmeath which are removed from the services of a bank. People living in these areas would have difficulty travelling the ten or 12 miles to the nearest bank to cash their pension. That situation is not acceptable. Will the Minister tell the companies who will quote for the business that they must be in a position to provide a comprehensive service across the country, even in rural areas? That will be important. Perhaps the Minister will respond to that question.

Page 19 of the interim report of the Joint Committee on the Family, "The Elderly, The Family and the State in Ireland", refers to the demographic context and quotes the consultant, Tony Fahey of the ESRI, a reputable consultant who has done much work in this area as follows:

Of particular interest to us here is the component of overall economic dependency represented by the trend in elderly economic dependency, that is, the ratio between the elderly and the numbers at work. CSO projections indicate that this ratio is due to decline up to the year 2006 from a peak reached in the mid-1980s . . . . . . . . In 1986, there were 35 elderly per 100 workers, compared to a projected figure of 31 per 100 workers in 2006.

Thus, the growth in the numbers at work in the next decade is projected to outstrip growth in the numbers of older people.

His comments are interesting. He states:

It might be felt that these projections are overly optimistic. However, more up-to-date data indicate that, if anything, they may understate the downward trend in economic dependency. Labour force growth in the three years up to 1996 has been more rapid than predicted (Labour Force Survey 1996). As a result, economic dependency has already fallen below the forecast trend line set out in Figure 2.5 and may continue to do so over the coming years.

Mr. Fahey also gives international comparisons. Some people who review the pensions scene in Ireland tend to use figures from abroad rather than Irish figures. He states:

We can get an indication of the internationally distinctive character of dependency trends in Ireland from Figure 2.7, which compares Ireland's old dependency ratios in 1960 (actual) figures and 2020 (projected) with those of a number of other European countries. In 1960, Ireland had the highest old dependency ratio among western countries. By 2020, it is projected to have the lowest, despite a small absolute increase. The increase in the old dependency ratio in Ireland over this period (which is about a quarter) is strikingly small compared to the large increases in other countries, which range from two-fold to four-fold.

He is saying the projected figures can be misread and that we are entering into a period over the next 25 years when our dependency ratio will increase substantially and improve dramatically for the betterment of the overall population. It is difficult to predict what will happen in 50 years' time when the 15 year olds currently at school will be 65 years of age.

Mr. D. Ahern

The working population from now until 2026 will move into the elderly age group, which will be the solid mass with whom we must work and whose pensions must be funded. We are going up the back of a wave of population and eventually we will fall down the front. That has happened in every developed country in the world and we will face it too approximately 20 years behind everyone else. I am not disputing what the Deputy said about slight differences in trend, but we have an ageing population. By 2056 all the 18 to 30 year olds will be a certain age and they must be funded.

Mr. Browne (Carlow-Kilkenny)

How can one predict a decrease in family size?

Mr. D. Ahern

We have had a decrease. Despite a slight increase in births and 15,000 people coming back to this country, we have still one of the lowest family birth ratios in western Europe.

Mr. McGrath

We are unique, not just in western Europe but throughout Europe, in that our population is increasing. We must bear that factor in mind.

Mr. Browne (Carlow-Kilkenny)

The Minister is saying that when the present group of workers become old age pensioners they will not be replaced.

Chairman

We must agree to differ on it.

Mr. Browne (Carlow-Kilkenny)

Will the Minister be here to worry about it in 50 years' time?

Mr. McGrath

The crucial issue is the post offices.

Mr. D. Ahern

Cheques cost 50p not 15p.

Mr. J. Brady

I welcome the commitments given by the Minister and by the Minister for Public Enterprise, Deputy O'Rourke. I understand that the Minister cannot comment on this issue. Post offices are the backbone of rural Ireland. Many villages in Westmeath no longer have post office services. It would be a tragedy if rural post offices were closed. I compliment the Minister for Public Enterprise for saving a post office in my area from closure in recent months. The ESB office in Kells was closed in 1995 despite the fact the then Taoiseach was from the constituency and his close friend was the Minister responsible.

Mr. Browne (Carlow-Kilkenny)

We discuss things objectively and we do not sway.

Mr. J. Brady

I know the effect the closure of that ESB office had on old people.

Mr. D. Ahern

It is the same in Ardee.

Mr. J. Brady

And in Carrickmacross. We all agree that post offices are part of the rural structure. Every effort should be made to keep them open. I am confident the Minister and the Minister for Public Enterprise will ensure they do not close because it would be a nightmare for everyone, particularly the elderly, if that happened.

Mr. Browne (Carlow-Kilkenny)

The Minister has told us his hands are tied because under European regulations these services must go out to tender. If An Post does not get this tender, post offices will be kept open as uneconomic units or they will have to be subsidised. This will lead to a problem in rural Ireland. The Minister will carry the can if anything goes wrong.

Mr. Moloney

We must do everything we can to keep rural post offices open. There is great concern in my constituency about threatened voluntary closures in three villages. The local community, particularly the elderly, fear they will lose their post offices. We should do everything we can to ensure the viability of post offices.

Mr. D. Ahern

I assure the Deputies it is the policy of the Government and particularly of the Minister for Public Enterprise to ensure that the network of post offices around the country is maintained. Her actions so far in this area prove that is the case.

Under EU law a contract is coming up for renewal at the end of this year. My Department, in conjunction with the Attorney General, is looking at the legal implications of this. Whether this goes out to public tender I, as Minister, will insist that a network of outlets, similar if not better than the existing one, is available to the recipients. I hope that assures everyone concerned about this because there is a great deal of misinformation circulating about this issue. At the end of the day, the future of the post office network does not come under my remit, but, obviously, the contract issue has some implications.

However, it must be acknowledged that as we head into the new millennium, my Department or agencies, including An Post, and others interested in the delivery of services to the public must be acutely aware of better methods to deliver such services, including e-commerce.

Chairman

I thank the Minister and his officials for appearing before the committee.