I am pleased to present the 1996 Estimates to the Select Committee on Social Affairs. The Estimate for my Department for 1996 amounts to £2,606,555,000. This is the figure which appears in the revised Estimates for Public Services and it takes account of the changes in overall public expenditure arising from the budget earlier this year.
The amount of more than £2.6 billion represents the sum provided by the Exchequer this year to fund social insurance and social assistance schemes and services. It also covers the cost of implementing the various improvements in social welfare announced in the budget, such as the increases in weekly rates of payments, the increases in the monthly rates of child benefit and the adjustments in PRSI rates for employers and employees. The sum also includes a special provision of £55 million for equal treatment arrears payments.
The main elements which make up the total Estimate for 1996 are social assistance payments which are funded totally by the Exchequer and which comprise the single biggest item of expenditure in the Estimates. They comprise a comprehensive range of means tested payments, including unemployment assistance, payments to pensioners, widows, lone parents, carers, people with disabilities and low paid workers with families, supplementary welfare, secondary benefits and child income support for all families. The total cost under this heading will be £2,396 million this year.
Social insurance benefits and pensions are paid from the social insurance fund which in turn is funded by PRSI contributions from employers, employees and the self-employed. The Exchequer makes good the deficit which arises each year between income received by way of PRSI contributions and social insurance benefits and pensions paid out. This payment to the social insurance fund amounts to almost £82 million this year. Payment to the social insurance fund to cover the costs of arrears to married women arising from the provisions of equal treatment legislation will amount to a further £55 million this year.
Administration costs for my Department's schemes and services, as covered by the administrative budget agreement, will amount to almost £135 million this year. Receipts into the Social Welfare Vote as appropriations-in-aid, which show up as a credit figure on the balance sheet, amount to over £61 million this year. Overall, the net figure comes to a total of £2,607 million which is the amount of the Estimate before the committee.
As members are aware, the amount of the 1996 Estimate does not represent the full extent of social welfare spending in Ireland. Total spending this year will, it is estimated, amount to a total of £4.35 billion, including the £55 million being provided to cover the cost of further equal treatment payments. Of the total spend of £4.35 billion, the Exchequer will contribute some £2.65 billion and the balance of £1.7 billion will be met mainly by employers, employees and the self-employed by way of PRSI contributions.
To put these figures in perspective, we spend almost £11.8 million each and every day of the year on social welfare. Some 900,000 people receive a weekly payment and over 1.5 million people benefit from those payments when adult and child dependants are taken into account. A sum of £3 million a day is spent on payments to elderly and retired people; another £3 million a day is spent in payments to unemployed people; £3.8 million a day goes on family income support, including child benefit and payments to widows, widowers, lone parents, carers and low paid workers with families in addition to other miscellaneous allowances and £1.5 million a day goes to the sick and disabled. The balance, amounting to around 5 per cent of total expenditure, covers administration expenses.
These figures demonstrate the comprehensive nature of the coverage provided by my Department to the wide range of people in need of our services. They also dispel forcibly the myth perpetuated by certain media interests that the Department of Social Welfare is focused exclusively on unemployed people. The figures themselves show that, in broad terms, one-third of our spending goes on the elderly, one-third on supporting families and one third on unemployed people.
When I appeared before the committee last year for the first time as Minister for Social Welfare I spoke about the fundamentally new approach which we adopted in framing the social welfare aspects of the 1995 budget. We set out to ensure that resources were directed at those in greatest need. The key words were "targeted" and "focused" as we deliberately moved away from the previous scatter gun approach which sought to appease all interests but failed, by and large, to satisfy anyone, most notably those at greatest risk of poverty. The clearest example of this fresh new approach was the decision to mount a direct assault on poverty through an unprecedented increase in child benefit payments, a £7 increase per month per child at a cost of over £100 million in a full year.
In this year's budget, we have continued the reforming approach adopted in 1995. Two main objectives underlay the budget measures. First, we set out to consolidate the gains achieved in 1995 by again providing for substantial increases in child benefit and by providing for increases in general social welfare payments in excess of the projected rate of inflation. Second, the budget contained a range of measures designed to tackle the greatest problem facing Irish society today, long-term unemployment.
The Government is aware this problem cannot be solved overnight, but the measures contained in the budget represented a cohesive and imaginative first step towards its resolution. They also represented the Government's determination that all citizens should share in the benefits of a successful economy and that these benefits should not be confined to those fortunate enough to be in secure, well paid employment.
In relation to social welfare reform, I draw the committee's attention to a number of notable measures which will help, in particular, to ease the transition from unemployment to active participation in the labour market. Substantial concessions have been introduced in relation to PRSI contributions for employees and employers. The employee's PRSI free allowance has been increased substantially from £50 to £80 a week. Thus, employees on full rate PRSI will not have to pay any contribution until their weekly earnings exceed £80. The ceiling for their contributions is only being increased by £15 a week.
Changes have also been introduced for the self-employed and "modified" contributors who will not now pay anything on the first £20 a week of their earnings. In addition, the minimum annual contribution payable by the self-employed has been reduced from £230 to £215. The employer's PRSI rates have been lowered from 9 per cent to 8.5 per cent in the case of the lower rate and from 12.2 per cent to 12 per cent in the higher rate. The ceiling increase from £25,800 to £26,800 is modest.
The total full year cost of these PRSI reforms amounts to almost £121 million and represents a fundamental strategic shift in the structure of employee PRSI. It demonstrates in the clearest possible way the Government's desire to encourage the creation of new jobs and to reward the enterprise of the employers and employees who are producing wealth and contributing to the State finances. I will return to the issue of PRSI generally later.
The 1996 budget also provided for the elimination from the social welfare system of a number of disincentives to taking up employment and these have now been given legal effect in the Social Welfare Act, 1996. Payment of child dependant allowances, which previously would have been lost immediately an unemployed parent took up employment, will now continue to be paid for a period of 13 weeks to people who have been unemployed for 12 months or more if they take up work which is expected to last for at least four weeks. This will provide an important level of support in the critical early months of employment. The income thresholds governing entitlement to family income supplement are being increased by £10 a week at each point. The effect will be that most recipients will gain an extra £6 a week. Further changes to FIS will make the scheme more accessible and responsive to the needs of those who avail of it.
The Social Welfare Act, 1996, introduces a crucial change to the arrangements governing the payment of unemployment assistance. A most undesirable side effect of the existing, extremely complex arrangements is that people who have the opportunity to do some part-time or casual work can find they are barely any better off as a result. This situation has been crying out to be rectified and I am pleased to have been able to do so. The new simplified arrangements will ensure people will now be able to avail of such opportunities secure in the knowledge they will be significantly better off as a result.
Allied to the reforms I described, further measures are being introduced, primarily under the direction of my colleague, the Minister for Enterprise and Employment, which focus specifically on the needs of the long-term unemployed. These include a refocusing and extension of the community employment programme, the introduction of an £80 a week recruitment subsidy payable to employers in respect of new employees who have been unemployed for three years or more and the introduction of a new scheme of work trials which will aim to place 5,000 job seekers, who have been unemployed for at least six months, with employers who have prospective vacancies or who are in a position to offer worthwhile work experience. Members will have seen notices in all the newspapers recently advertising the availability of these new arrangements and encouraging workers and employers to avail of them.
In my Department, the back to work allowance, which has already proved successful in encouraging long-term unemployed people and lone parents to return to employment, is being further extended with an increase in the number of participants from 10,000 to 15,000 in 1996. Additional funding is also being provided to assist participants engaging in self-employment ventures with business advice, technical advice and training.
The Government, through the initiation of this wide ranging package of measures, is demonstrating its willingness to provide the opportunities and rewards for employers to create new jobs and to provide real opportunities for the long-term unemployed, in particular, to participate in the labour force.
The 1996 Estimate shows very clearly how large and complex the social welfare system is today. It is a system which has evolved and developed over a long period of years and, by and large, it has served the country very well. There is unquestionably, however, a need to reform and streamline the social welfare system to enable it to interact more effectively with other services, such as health and employment. While this level of reform is necessarily an incremental process, substantial progress has already been made through the social welfare legislation enacted over the past two years. In the context of the wider reform of the social welfare system, I would like to briefly draw the committee's attention to some of the other ongoing initiatives in the social welfare area which are not explicitly referred to in the Estimate before us today but which are nonetheless crucial to the work of my Department.
The Government has committed itself to the development of a major national anti-poverty strategy. A high level interdepartmental committee is now working on drawing up the strategy in consultation with, and including participation by, those affected by poverty. This is the first time an Irish Government has committed itself to set out an across the board national strategy designed to address all aspects of poverty and disadvantage.
Last year I announced the establishment of the Commission on the Family which is examining the needs and priorities of families today and which will recommend how they can be strengthened and supported for the future. The commission will make an interim report to me and to the Government later this year and will produce a final report by June 1997.
The work of the Expert Group on the Integration of the Tax and Social Welfare Systems is now being finalised and I will be seeking Government approval for the publication of their report in the next few weeks. This report will provide invaluable guidance on the steps required to restructure the taxation and social welfare systems. I should mention that the group made a number of valuable recommendations prior to the 1996 budget and several of these were adopted by Government and legislated for in the Social Welfare Act, 1996.
The ESRI has been commissioned to review the minimum adequate income rates that were recommended by the Commission on Social Welfare in 1986 and I expect to receive their report in the next few months.
My Department is also preparing a discussion document on social insurance and the PRSI system which will be published shortly and which will provide a good focus for an informed debate on this critical element of the social welfare system. The number of people contributing to and benefiting from the social insurance contribution and payment system serves to emphasise the significance of the system in Irish life today. More than 1.3 million employees make social insurance contributions each year. Some 135,000 employers and a similar number of self-employed also make social insurance contributions each year; and pensions and benefits are paid out to more than 400,000 individuals and families each week.
The Government is committed to the maintenance and development of the social insurance system. It represents a valuable long-term social contract between employers, employees, the self-employed and the Government. By the same token, it is not a static system and it is appropriate that its future development should be considered now. The discussion document will provide a useful framework for that debate and I would urge all members of the committee and the two Houses to study it closely when it is published and make their views known. I would be happy to come before the committee when we have published that document if the committee wishes to discuss it with me.
The continuing development and reform of our social welfare system provides us with the challenge of meeting the many competing demands of an increasingly diverse Irish society. It is vital that the limited resources available to us are put to the best possible use in the interests of all those who are reliant to a greater or lesser extent on the social welfare system.
I am satisfied that we have achieved an appropriate distribution of the funding available in 1996 and, therefore, commend this Estimate to the committee.