Amendment No. 30 is out of order.
SECTION 33.
Amendment No. 30 not moved.
Amendments Nos. 31 and 33 are related and may be discussed together.
I move amendment No. 31:
In page 25, subsection (1) (b), between lines 32 and 33, to insert the following;
"Provided that the Minister shall, by regulations, prescribe a system of marginal relief for persons whose reckonable income marginally exceeds the limits set out in paragraphs (a) and (b) of this section.'.".
Under the provisions of sections 33 and 34 of the Bill employees whose weekly earnings do not exceed £173 per week and self-employed people whose earnings do not exceed £9,000 per year will be exempt from liability for the health contribution of 1 per cent and the employment and training levy of 1.25 per cent with effect from 6 April next. Amendments Nos. 31 and 33 are designed to ensure that employees are not treated less favourably than the self-employed as far as these exemptions are concerned. These amendments provide for the refund of health contributions and the employment and training levy paid in a week in which an employee's pay is excess of £173 but where his or her cumulative pay for the year is less than £9,000. This would arise, for example, in the case of employees whose earnings in a particular week would be over £173 because of overtime. It is simply to ensure they receive the same benefits.
Has my amendment been ruled out of order?
Yes.
I will speak on this amendment and I will not raise the matter on section 34. When people reached the limits of £173 per week and £9,000 per year, my amendment sought to have the Minister introduce a sliding scale so that if someone marginally exceeded the limit some relief would be given because the current position is that the person would receive all or nothing. Does the Minister propose to look at the means test limits and index link them, as the Department of Health does on an annual basis?
I welcome the fact that employers will be exempted from the health levy and that low paid workers will also be exempted in certain respects, particulary in the textile trade. The difficulty is that these threshold points create a trap, to which I referred earlier. Once one goes £1 over the threshold, one's total income is liable to the levy. This also applies in other areas, such as the FIS system. It defeats the good intention of assisting low paid people by trapping them below that threshold. Statistics show that if a person on the current £60 exemption limit for PRSI earns £60 they are fine. However, if they earn £61 the whole amount becomes liable to PRSI. If they get a small increase in their wages, they end up losing money as a result. As way must be found to deal with this matter.
I mentioned the question of integrating tax and social welfare and creating minimum payments. The question of providing exemption limits for tax and social levies, below which those levies and taxes will not be imposed, must also be considered. For example, the first £70 would be tax free and levy free and only earnings in excess of those thresholds would be taxable or levied. I am sure the Minister will argue that it would be expensive and I am sure that would be the case. However, it is the only effective way to eliminate the traps. I take Deputy Allen's point in relation to sliding scales but even they have anomalies, although that may need to be done as an interim approach to the issue. If we are serious about eliminating poverty and unemployment traps, we must move in the direction I suggest with regard to exemption thresholds.
The Minister is harmonising the social welfare system with the income tax system. I raised a matter with the Minister for Finance last year concerning tax rebates for people who earned more than £173 per week but who were engaged in seasonal work with Bord na Móna, or with meat factories. People on fixed contracts may have earned £300 per week for 20 weeks and had income tax deducted and I wanted to ensure that it was repaid. The Minister is introducing consistency regarding the treatment of social welfare health and other levies. However, Deputy De Rossa's point has merit. The problem is that once the margin is reached, everything else falls and a large amount is lost.
I appreciate that there is quite a large cost implication but there are huge problems at the margin. It will amount to people almost being nervous of receiving a wage increase. They have been given a 2.25 per cent wage increase but there are still those on the low income scales. As Deputy De Rossa said, perhaps a certain amount could be free of all incumbrances, such as tax and PRSI. This might be a way to deal with it. Deputy Allen's formula of graduated relief, from £173 to £190, is similar to the marginal relief that was introduced for income tax some years ago. That also might be a way to deal with it. We congratulate the Minister for tackling the low income problem, especially in the labour intensive industries. However, as the Minister said, every time something positive is done, it creates a possible anomaly somewhere else. I have heard this mentioned in other places and I am sure the Minister is aware of it. Perhaps he could take cognisance of it and devise some mechanism to deal with it.
I agree with my colleagues. There is an appreciation of what the Minister is trying to achieve. Unfortunately, as the Minister said, a good intention in this matter may have a bad result for people who are just over the limits. There is a case to be made for some type of marginal relief system. I fear people will be trapped in low income jobs and that both they and their employers will be stuck there because of the limits. This matter should be examined, although I do not expect that to be done today. There is merit in the cases that have been made.
It is important to remember that 100,000 workers have a medical card. The employers of those workers will benefit significantly and directly. Approximately 80,000 employers, 400,000 employees and occupational pensioners and 60,000 self-employed people will benefit. The total cost of the measure, including the different elements, is £89 million, which is substantial. Deputy De Rossa said he was aware that there would be a large cost involved in doing some of the things that are desirable. It is very costly to do this and it is a major step.
Deputies De Rossa and Allen earlier mentioned the security of the Social Insurance Fund. I am concerned about that. We are taking a large step here and it will have to settle down in real terms so that its impact on the Social Insurance Fund can be gauged and the fund's security ensured. As regards this measure, the position is fine at present. I appreciate the points made by the Deputies, that it can be considerably refined. However, the situation arises every year that while people agree a measure has the best of good intentions, they say it will have a bad effect and should not be implemented. Nobody can come up with the perfect solution, particularly in advance of doing something. We have broken the mould and taken a major step. We will examine and review it and consider how we go forward. It is clear that a substantial number of people on lower incomes will benefit. It is a major administrative undertaking and this is one of the difficulties that constantly arise. However, we are proceeding with it.
I appreciate the point made by Deputy Allen regarding the sliding scale and Deputy De Rossa's point that it could be dealt with in different ways. The problem is that even to introduce this measure costs so much at this stage. One can imagine what it would cost to take some of the other steps that we might consider logical. This measure has been taken and will be reviewed. It will be helpful, particularly for those on lower incomes.
Amendment agreed to.
Section 33, as amended, agreed to.