In recent days, we have seen another welcome indicator that Ireland’s economic recovery is continuing. The Live Register has fallen below 400,000 for the first time in over four years. This is no cause for celebration – the number of people out of work remains far too high. But it confirms that the Government has taken the right measures since coming to office and inheriting an unprecedented crisis.
The labour market is improving because of the policies we have pursued, and that is why the economy is healing – slowly but surely. We are exiting the bailout programme and can look forward to regaining control of our destiny. The Live Register figures are a clear sign that things are moving in the right direction. The latest CSO data showed there were 396,512 people on the Register in October, 23,000 fewer than the same month last year and almost 34,000 fewer than in October 2011. This is a very welcome turnaround considering that the Register was firmly on an upward trajectory towards 500,000 when this Government took office. The turnaround is the chief reason why I was able to lower the spending reductions required of my Department for 2014.
When negotiations on the Budget began, the Department was initially expected to make new spending reductions of €440 million. But this was ultimately reduced to €226 million. An additional €30 million in savings will be made through more fraud and control measures in 2014, while €34 million will be saved through better management of expenditure and lower than expected demand on some schemes, bringing the Department’s cumulative adjustment to €290 million. Even with this lower adjustment, the Department continues to play its role in the necessary deficit reduction programme as Ireland prepares to exit the bailout. Overall welfare expenditure will fall below €20 billion in 2014 - despite demographic pressures due to the growing number of pensioners. And welfare expenditure will continue on a downward trajectory as we help more people back to work through our Pathways to Work strategy.
That is the context in which I bring this Bill forward.
Protecting core benefits:
I mentioned earlier the demographic pressures on the Department’s budget.
These pressures mean that, for example, the Department had to provide an extra €190 million this year for expenditure on State pensions and widow and widower contributory pensions. Nonetheless, I have protected pensions in the Budget. I have also protected Carer’s Allowance, Disability Allowance and the other core weekly payments upon which people depend. I am also protecting crucial supplementary supports for pensioners, carers and people with disabilities, such as the Fuel Allowance, the Electricity/Gas Allowance, Free Travel, the Half-Rate Carer’s Allowance and the Respite Care Grant. Child Benefit has also been protected in this Budget, and will remain a vital universal support for all families and all children.
Supporting families in work:
We don’t just support people when they are out of work. We support them to stay in work – a crucial point which critics of the welfare system often miss.
Last year, my Department spent €224 million on Family Income Supplement – the weekly tax-free top-up payment for workers on low pay with children. Next year, we will spend more than €280 million. At present, more than 40,000 working families with a total of more than 90,000 children benefit from the scheme. FIS makes the crucial difference for them by making work more attractive than welfare and in the process helping to build a better future for their families.
Helping people back to work:
The reality is that helping people back to work – and to stay in work – is the most effective way of reducing welfare expenditure. Every 10,000 we help off the Live Register saves around €95 million in welfare expenditure per year.
That is why, since coming into Office, I have focused on transforming the Department from the passive benefits provider of old to an active, engaged and focused organisation that provides employment services for jobseekers and employers alike. Our core aim is to engage with every unemployed person to make sure that their first day out of a job is also their first step on the pathway back to work. That work is paying off – and the Live Register figures are proof of this. Separate data shows that the numbers in work increased by 33,800 in the last year, and the private sector is now creating 3,000 new jobs every month.
Opportunities for Young People:
It is in that context that I am bringing forward changes to Jobseeker’s Allowance for younger people. Most member states require a young person to have made some social insurance contributions before they can qualify for unemployment benefit. Ireland is one of the small numbers of EU member states that, in addition to insurance-based payments for young people, also pays a non-insurance based payment – Jobseeker’s Allowance. I’m ensuring that this continues, because of the difficult economic climate and the recognition that not everybody can walk into a job at 18 years of age. However, it is also true to say that payment of a significant amount of welfare support upon turning 18 is not the best way of helping young jobseekers into work. Work, training and education supports are much more beneficial in the long-term to young jobseekers.
That is why I am making the changes relating to Jobseeker’s Allowance for young people - to ensure a greater emphasis on those work, training and education supports. This will ensure that young people are always better off in education, employment or training than claiming.
Even then, it is worth noting that the amounts paid to young jobseekers in Ireland will still exceed those in several member states, including the UK. In the UK, jobseekers 24 years of age or younger get £56.80, or €67 per week.
To facilitate the shift towards employment supports, the Department will enhance the range of opportunities currently on offer in the form of internships, participation on employment schemes, subsidised private-sector recruitment, and supports for self-employment. The full range of youth employment initiatives will be set out in our plan for the implementation of the EU Youth Guarantee, which will be finalised and submitted to the EU by the end of the year. As part of that, we will be looking to maximise the share of EU funding allocated to Ireland. Even before any EU funding is agreed, the Department is already committed to spending €1.08 billion next year on work, training and education places and related supports for jobseekers generally – an increase of almost €85 million on the projected spend this year.
Main provisions of the Bill:
I will now outline the main provisions of the Bill.
Section 1 provides for the short title, construction, collective citations and for the commencement of sections by way of commencement order.
Section 2 provides for the definition of certain common terms used throughout the Bill.
Section 3 provides for the second element of the Budget 2013 decision to broaden the base on which PRSI contributions are charged so as to provide that the exemption from PRSI that applies to employed contributors and occupational pensioners under 66 whose only additional income is unearned income will be abolished with effect from 1 January 2014.
The additional unearned income will now become liable to PRSI at 4% provided the person is a chargeable person for Revenue purposes. Essentially, a chargeable person means those with unearned income in excess of €3,174.
This will not apply to PAYE taxpayers with no other income, or additional income less than €3,174.
In addition, people who have reached State pension age of 66 are not liable to pay PRSI, and therefore will not be affected.
Sections 4 and 7 increase the number of waiting days for entitlement to Illness Benefit and Injury Benefit respectively from 3 days to 6 days.
This change takes effect from 6 January 2014.
Section 5 provides for the alignment of the minimum and maximum rates of Maternity Benefit to a standard rate of €230 per week.
The change only applies to new claimants and comes into effect from 6 January 2014.
The 26-week duration of the payment is preserved under this Budget because we know how important this time is for families and their children.
This level is substantially in excess of the 14 weeks required under EU legislation.
For example, in the Netherlands and France only 16 weeks of Maternity Benefit is paid.
Section 6 provides for the alignment of the minimum and maximum rates of Adoptive Benefit to a standard rate of €230 per week.
The change only applies to new claimants and comes into effect from 6 January 2014.
Section 8 provides for the discontinuation of the payment of a Bereavement Grant in the case of deaths occurring on or after 1 January 2014.
However, it is important to note that there remains a range of additional supports available for people following a bereavement, worth considerably more than the Bereavement Grant:
· Widow's, Widower's or Surviving Civil Partner’s Pension which is a weekly payment, based on contributions or a means test
· The Widowed or Surviving Civil Partner Grant is a once-off payment of €6,000 where there is a dependent
child
· A number of social welfare payments, including State pension, continue in payment for six weeks following a death, delivering an income of €1,380 to the surviving spouse, partner or estate
· If a person dies because of an accident at work or occupational disease, a Special Funeral Grant of €850 is paid
Section 9 provides for the amendment of the rates of Jobseeker’s Allowance payable to certain claimants aged under 26 years.
A reduced weekly rate of €100 currently applies to 18 to 21-year-olds and a reduced rate of €144 applies to 22 to 24-year-olds, in both cases where the claimant does not have children.
This section provides that the reduced weekly rate of €100 will continue to apply to existing claimants aged between 18 and 21 years until they reach 25 years, and will also apply to new claimants aged between 22 and 24 years.
Section 9 also provides that the reduced weekly rate of €144 will continue to apply to existing claimants aged between 22 and 24 years when they reach 25 years and will apply to new claimants who are aged 25 years.
In addition, these lower rates of Jobseeker’s Allowance will apply to claimants aged 25 and under who have exhausted their entitlement to Jobseeker’s Benefit.
Claimants who have children will be unaffected by these measures.
These changes will apply from 15th January 2014.
Section 10 provides for amendment of the rates of Supplementary Welfare Allowance payable to people less than 26 years old.
The reduced weekly rate of €100 rate (currently applicable to 18 to 21-year-olds) will apply to claimants without children who reach the age of 22 from 9 January 2014 and to new claimants aged 23 and 24, also from 9 January 2014.
The reduced weekly rate of €144 (currently applicable to 22 to 24-year-olds) will apply to people without children who reach the age of 25 from 9 January 2014.
Section 11 provides for the discontinuation of the Mortgage Interest Supplement scheme for new applicants with effect from 1 January 2014 and allows for a winding-down of the scheme for existing claimants over a four-year period, i.e. by 1 January 2018.
Section 12 provides for the discontinuation of:
a) the higher personal weekly rate of Invalidity Pension of €230.30 payable where the pensioner attains 65 years of age on or after 2 January 2014, and
b) the higher weekly rate of increase of increase for a qualified adult of €206.30 payable where the qualified adult attains 66 years of age on or after 2 January 2014.
Section 13 provides that where a specified illness or disability payment is paid by the Department to a person who is unable to work as a result of an accident, injury or disease, and that social welfare recipient has been compensated by way of court settlement or otherwise, the amount of such illness-related social welfare payments that have also been paid as a consequence of the personal injury is to be repaid to the Minister by the person liable to pay compensation. In most cases the compensator is an insurance company.
Currently compensators are allowed to reduce the amount of a settlement arising from a motor accident by an amount equivalent to any illness benefit or invalidity pension paid by my Department. In effect, the benefits involved represent a subsidy to the compensators in such cases. Similarly, in the case of occupational injuries, compensators are allowed to offset injury benefit and disablement pension payments against compensation for loss of earnings.
Part 3 and section 14 provide for amendment to section 38 of the Personal Injuries Assessment Board Act 2003 consequential to section 13.
Section 15 provides for the definition of the “Principal Act” to mean the “Pensions Act 1990”.
Sections 16 and 17 provide for the inclusion of a reference to the Surviving Civil Partner (Contributory) Pension in section 59B and 59C of the Pensions Act.
Section 18 inserts a new section 59H into the Pensions Act and provides the trustees of a pension scheme with the power to amend the scheme rules to ensure that the correct occupational pension is paid at age 65.
This amendment arises from the change in the qualifying age for State Pension from 65 to 66 from January 2014.
It is to address situations which may arise in a pension scheme where the rules of the scheme provide for age 65 rather than normal pensionable age, and the scheme rules cannot be amended to address this. This change is being made to ensure that trustees can act as appropriate to administer their schemes and are not prevented by any conflict between the Pensions Act and the scheme rules from making any necessary arrangements to amend the scheme.
It provides for the cessation of a bridging pension which may be payable in the period before the State Pension becomes payable and for determining the correct rate of occupational pension payable in the case of an integrated pension.
That completes the main provisions of the bill.
Conclusion:
Protecting those in need in a very difficult economic climate – while reforming the welfare system to ensure it delivers better long-term outcomes for customers – are central to the Government’s mission.
In 2014, my Department will continue to help more people back to work, reduce the overall welfare spend as part of the sustained effort to repair the public finances, and ensure the safety net remains firmly in place for those who need it most.