Speech on the Budget 2006

Séamus Brennan T.D., Minister For Social Affairs

My Department has a pivotal role to play in ensuring that the fruits of our economic growth benefit, in particular, those who feel most vulnerable and who are in need of supports and encouragement

I have repeatedly stressed that as a country we can only really be proud of a booming economy and a vibrant, modern country when it reaches out and reaches down and lifts those who, for whatever reason, have been left behind or feel marginalized.

For that reason, I am determined that the substantial resources available to my Department will be targeted at delivering a 21st century welfare service.

It must be a service that responds in a way that is about more than allowances and benefits, important and all as those welfare and financial lifelines are to hundreds of thousands of or citizens.

It must be a service that blends recognition, compassion and support with encouragement, incentives and activation so as to ensure that the potential and contribution of no one person in our system is overlooked or neglected.

It was with this philosophy and direction in mind that I approached this Budget with a number of key priorities in mind.

I wanted to continue to improve the position of our older people and to recognise their valuable contribution to this State. They deserve to have a decent income that allows them to live out their later years with dignity and with security without the threat of poverty or isolation.

I wanted to take a decisive step forward towards the elimination of poverty, and especially to intensify the confronting of the unacceptable blight of child poverty.

I wanted Budget 2006 to assist in the development of a programme of supports and opportunities for those parenting alone who, with their children, are in danger of falling into a cycle of deprivation and marginalisation

I wanted to improve income supports to, and recognition of, carers who perform a valued and valuable service for the whole of society.

I wanted to ensure that this Budget reflected, and underpinned with financial supports, the evolving new social agenda that I am pursuing and that has at its core a social welfare support system that is active instead of passive and that assists people to live with dignity and enables them to make a valuable contribution towards society.

This Budget has delivered on these objectives. By any standard this is a ground breaking Budget. The facts speak for themselves:

• the Budget delivers the largest ever spend on social welfare of €1.12 billion
• total expenditure in 2006 will reach €13.5 billion. This is double what was spent in 2000 and will benefit 1.5 million people
• €800 million is being spent in substantial increases in allowances, pensions and entitlements and a further €300 million specifically for a range of social policy reform measures
• social welfare payments have been increased by almost 4 times the expected rate of inflation

The lowest rates of social welfare have been increased by an unprecedented €17 a week, to a new level of €165.80, with proportionate increases in the Qualified Adult Allowance

• means tested old age pensions have been increased by €16 a week to €182 and contributory pensions by €14 to over €193 a week
• a wide ranging reform programme will boost the entitlements of older people, alleviate poverty, support activation and recognise carers
• fuel allowances are being increased by €5 a week as part of a major fuel poverty relief package costing over €42 million
• carers allowances are being increased by over €26 a week so that the top rate of carers allowance will now stand at €200 a week
• a range of measures costing €28m will promote activation by improving income disregards and tapers for people with disabilities and many others
• Maternity Benefit is being increased to 80% of reckonable weekly earnings

I will now address the main features of the Social Welfare Budget in some detail.

Everyone is entitled to a basic standard of living. As I said earlier, the fruits of the economic miracle of recent years will be squandered if we do not use them to benefit the whole of society. We have a responsibility to help those who for reasons of age, health or other circumstances rely on help to make do.

The principles of social solidarity underpin our social welfare system, and the programme of this Government which has committed itself to delivering a number of specific improvements in social welfare rates by 2007.

The increases introduced in this Budget are unprecedented and demonstrate without doubt our determination to deliver on our commitments.

The needs of older people have been a priority for this Government since taking office in 1997.

We have delivered record increases in pensions since then. In fact, pensions have increased by over 80% since 1997 which is well ahead of the increase in the Consumer Price Index and gross earnings over the same period. The further increases in pensions announced in this Budget reaffirm the Government’s commitment to providing decent social welfare pensions for people.

The increase of €17 a week to the lowest social welfare rates will apply to a wide range of schemes, including those paid to widows under 66 years of age, the unemployed, people unable to work due to disability or illness and lone parents.

In framing these proposals, I was especially mindful both of the fact that many in these groups are at risk of consistent poverty, and of the target in the Programme for Government and Sustaining Progress to achieve a rate of €150 per week in 2002 terms, by 2007, for the lowest social welfare rates.

With the lowest rate at over €165 a week, we are now on course to complete that commitment in next year’s Budge

Over the past year I have been laying out, with the support of the Government, a strong new social reform agenda and today major funding of more than €300 million is being made available to underpin and give tangible effect to these important, and necessary, reforms.

The reforms, while protecting those who are disadvantaged amongst us, must also strive to get behind the welfare payments and tackle the social issues involved. It is a well established fact that the best route out of poverty is through employment.

That is why, through these reforms, I want to create the changes and opportunities that will bring people from welfare dependency to financial independence by providing the stepping stones to a better standard of living and income. I will now address some of these measures.

On many occasions, I have identified child poverty as one of the Government’s key challenges. National and international research confirms that children who grow up in disadvantaged households are more likely to do poorly at school, to struggle to find a job, and to be unemployed, sick or disabled when they become adults, precipitating an inter-generational cycle of disadvantage and deprivation. The long-term cost of poverty in childhood for individual children, their families and communities and, indeed, for society at large, demands that we address this issue as a priority.

Measures to address child poverty cannot be progressed in isolation from other aspects of our income support arrangements. In the context of Budget 2006, I had a number of specific objectives in this regard. Specifically, I wanted to:

• substantially increase total family income by giving unprecedented levels of increase to all the basic social welfare rates of payment
• reform our current income support arrangements to maximise the benefits of work for low income households
• meet the remaining government commitments in relation to child benefit
• target additional resources at those most in need of additional support through those instruments that could be implemented immediately, and
• ensure that these specific measures are congruent with a longer term government strategy on child income support

More than €100 million is being invested in increases that lift the Child Benefit payment rates to €150 for the first two children and €185 for the third and each subsequent child. The entitlement is paid to over 540,000 families in respect of over 1 million children. With these new increases the Government has now fully honoured its commitment on Child Benefit. Honouring this commitment, when taken together with the Government’s Childcare package announced yesterday, represent a significant contribution to the alleviating of child poverty and in support for children. All families with children under 6 years will benefit from the new childcare payment. This will bring the total annual cash support including Child Support for children to at least €2,800 per annum.

When it comes to practical, targeted and concentrated measures to tackle poverty then the Family Income Supplement (FIS) has an increasingly important role to play. That is why I have made major changes to the support scheme, making it particularly beneficial to larger families, and increased funding by a further €25 million. FIS is paid to parents in low income employment with the objective of directing more resources to larger families. Under the changes that are now being introduced, FIS payments will make further significant contributions to incomes in thousands of low income homes.

As a result of the improvements it is estimated that over 5,000 additional families will become eligible for the payment next year. From FIS alone, depending on the size of the family, weekly increases will range from over €11 to €169 a week. For example, a family with 4 children could see its weekly FIS payment rise by up to €64.80 a week while the increase for a family of 6 children could rise by nearly €117 a week.

FIS can contribute significantly to boosting child support incomes.

For example-

A family with earnings from employment of €20,000 and with two children under 6 years, would qualify for €3,900 in FIS annually. When you add to that to the €2000 in childcare payment and €3,600 in Child Benefit then that family has an annual tax free child welfare income support of €9,500 a year.

A For a family on the same income of €20,000 but with four children, two of them aged under 6 years, the annual FIS support amounts to €7,644, giving the family a total child support package of €17,684 a year. At €30,000 income from employment, the same family would still qualify for total child support income of €11, 694 annually.

For thousands of families on low incomes, another important support is the Back to School Clothing and Footwear Payment. This payment is being substantially increased by €40 per child and entitlement to it is being further extended.

I am also making a further €2 million available to the school meals programme which makes a valuable contribution to the quality of life and the educational opportunities of children in low income families.Over €10 million is now earmarked for the various school meals initiatives next year.

I view these measures as being only the first steps in a concerted programme of action over the next few years aimed at vastly improving our system of child income support. Most deputies will be aware that the National Economic and Social Council (NESC) has spent considerable time and effort during 2005 in analyzing the issues and developing proposals in relation to child income support. They have been examining in particular, the possibility of merging FIS and Child Dependent Allowance into a second tier child income support, which would avoid the disincentives inherent in Child Dependant Allowance. That report will set out the broad principles of such a payment rather than a detailed operational blueprint.

My priorities for 2006 will include how best we can pursue the proposals arising from the report. In the meantime, my budget package addresses these broad principles by adjusting the FIS income thresholds in a way which makes a bigger contribution toward larger families than previously. This approach is a key feature of previous proposals for a second-tier child income support payment.

I want to comment specifically on the situation of lone parent families. Only about half of all lone parents are in paid jobs – one of the lowest participation rates in the OECD. Particularly worrying is the fact that over 40% of one parent families are categorised as 'at risk of poverty' at a time when Ireland is continuing to enjoy strong economic growth.

My Department provides income support to about 80,000 lone parents through the One Parent Family Payment at a total cost this year of over €760 million. Since I became Minister for Social Affairs, I have expressed concerns about the position of lone parents. As colleagues will know, I have initiated a major review of the One Parent Family Payment in order to assess how best we can support lone parents in their efforts to improve their own lives and those of their children. That review is now being finalised and I will be bringing it to Government in January next with a view to publication and wide consultation. I very much look forward to hearing the views of this House, lone parent representative groups and other commentators on these proposals.

In the normal course of events, I would do nothing to the structure of the payment until the review is published and debated. However, I have decided not to delay action on one important aspect of the payment. As many in this House may know, there has been no change to the income limits applying to the One Parent Family payment since the scheme was introduced in 1997. I have said publicly on many occasions, that I want to give lone parents an opportunity to continue to increase their earnings without raising their fears about losing their entitlement to the payment, which I know from speaking to many lone parents, represents their financial security. In recognition of this I am pleased, therefore, to increase the upper income limit for the One Parent Family Payment from €293 to €375 per week. This substantial increase will encourage employment and ensure financial security. Lone parents working over 19 hours per week can also claim the Family Income Supplement.

I strongly believe that while earnings threshold have a major role to play, other important factors also affect the ability of lone parents to take up employment and the nature of that employment. These have been identified in the Government’s discussion document which I will be launching in the New Year.

This is an appropriate juncture to mention that I am providing additional funding in the Budget to the Family Support Agency and Money Advice and Budgeting Service so that they can further develop the services they provide to vulnerable families.

The additional funding of €3 million to the Family Support Agency will enable the establishment of 12 new Family Resource Centres around the country and increase the level of grant assistance that the Agency provides to marriage and family counselling agencies, amongst other initiatives.

Since its inception 13 years ago, the Money Advice and Budgeting Service has developed into a nation wide network providing advice and support to people who often find themselves at the end of their tether coping with debt and the challenge of making ends meet.

It is an excellent service and I am keen to put it on a sure legislative footing for the future. I am currently consulting widely with the various stakeholders within MABS and I hope to be in a position to move forward on the Money Advice and Budgeting Service Bill next year. The additional funding I am providing for MABS includes provision for the further development of the service as well as specific funding for the establishment of a national Helpline.

As I indicated at the publication of the 2006 Estimates, older people are a priority for my social reform agenda. We have a booming economy and it is only right that the people who laid the foundations for our current prosperity should be able to enjoy the fruits of the tremendous strides which the country has made over the last decade or so.

This Budget makes provision for a number of very important measures which are designed to target resources at particular groups of older people. In considering these measures I was anxious:

• to target those who are at the greatest risk of poverty
• to allow people to supplement their social welfare pension through employment, and
• to simplify the system of income support for older people who do not receive contributory pensions

In this regard, people aged 66 and over can be in receipt of six different non-contributory schemes depending on individual circumstances and each scheme has its own individual means test. This is an anachronism and has no place in a modern social protection system. Accordingly, I propose to combine all non-contributory payments for people over 66 years of age, other than Carer’s Allowance, into one standard enhanced non-contributory pension scheme with a greatly improved means test. I am increasing the amount of weekly means disregarded from €7.60 to €20 per week for this standard pension. I am also providing a special earnings disregard of €100 per week. I would regard this latter measure as a first step on a process to provide incentives to older people to continue in employment. It is estimated that almost 34,000 people will benefit from these changes at a cost of €20 million.

When the standard pension is introduced next September, individual pensioners, currently on reduced rates of payment because of their means, will be better off by up to €12.50 per week and up to €20.80 where a Qualified Adult Allowance is payable. I am also pleased to tell the House that the under the new arrangements, a single pensioner, with no other means, will be able to have up to €35,000 in capital and still qualify for a pension at the maximum rate. This figure is doubled to €70,000 in the case of a couple.

Research shows that the incomes of pensioners' declines with age and that pensioners have a higher risk of poverty as they grow older.

Accordingly, I think it is appropriate that we should target additional resources at this group and I have, therefore, increased the additional allowance paid to those over 80 years of age by €3.60 to €10 per week. This measure will benefit over 100,000 pensioners including some 33,000 receiving widow's and widower's pensions.

When added to the increases in the basic pension which I announced earlier, a contributory pensioner over 80 years of age will now have a pension of €203.30, a week, while pensioner couples will receive additional increases ranging from €9.30 to €10.80 a week. By any standards these are exceptional increases and a further demonstration of our commitment to those who are elderly.

As the House will be aware, a key part of our overall pensions strategy is an increase in occupational and private pensions coverage. I have received a very comprehensive report from the Pensions Board on the current situation and the measures we might take in the future. This report is currently before the Cabinet for consideration and when this is completed it will be published. I would hope the report will engender a national debate on the future of our pensions system when published.

At the end of the day our overall objective is a decent income for everyone in retirement. We are lucky in that we have a window of opportunity available to us to decide on a system which is both adequate and sustainable in the future. I do not intend wasting this opportunity.

In the run-up to the Budget, I received many representations from parliamentary colleagues and representative organisations seeking an increase in the level of allowance paid under the National Fuel Scheme. The issue of fuel poverty is an emotive one touching as it does on one of the most fundamental human needs – the need for warmth and shelter. At present a means tested allowance of €9 is paid to recipients of long-term social welfare payments for 29 weeks of the year.

In general, I tend to the view that it is better to channel Exchequer resources into increasing basic social welfare rates rather than diluting the impact by diverting resources into allowances which, by definition, are payable to a smaller number of people. However, on this occasion I was influenced by the fact that the allowance has not been increased since 2002 and that it is targeted at the most vulnerable households including the elderly, those who are ill or with disabilities and households with young children.

Accordingly, I am pleased to be able to increase the allowance to €5 a week, payable with effect from January 2006. I am also availing of the opportunity to remove the current anomaly whereby residents in some local authority flat complexes with communal heating systems were ineligible for the fuel allowance. Such residents will now be able to qualify for the allowance if they meet the other conditions of the scheme. In all over €125m will be spent on fuel allowances next year benefiting nearly 275,000 households.

The term “fuel poverty” refers to more than the inability to afford adequate heating. It also refers to the fact that people on low incomes often live in poorer quality, energy inefficient housing. As a result, scarce financial resources are not used to best effect. Sustainable Energy Ireland is currently running a pilot action programme of housing insulation and they are also involved with the Combat Poverty Agency, my Department and other State agencies in a pilot research project in Cork and Donegal aimed at improving heating systems and insulation in selected private dwellings. The outcomes of these projects are being monitored to determine the benefits for the households concerned in terms of improved cost efficiency, comfort and health. These are very worthwhile initiatives and the kind of practical and focused response which provide a lasting solution to fuel poverty. Accordingly, I am delighted to be able to allocate a grant of €2 million to Sustainable Energy Ireland to enable them to extend these projects.

This will enable them to provide insulation in a further 3,300 households.

I now turn to a topic which I know is of concern to members of the public and Members of the House. I refer to the position of the many people who care for older people and those with disabilities in their homes.

I will start by saying a few words about our future plans in relation to the care area generally:

This Government has placed an increasing emphasis over the past nine years on the role of community care in supporting the vast majority of people who wish to remain in their own homes and in their own communities. The long term care agenda is a very important aspect of social policy and this Government is committed to developing a framework for its proper development in this country.

Earlier this year, the Tánaiste and I established a working group on long-term care which was chaired by the Department of the Taoiseach and comprised senior officials from the Departments of Finance, Health and Children and my own Department. This working group was charged with identifying the policy options for a financially sustainable system of long-term care.

The House will be aware of the plans of my colleague, the Tánaiste and Minister for Health and Children to refocus the delivery of care for older people with an emphasis on community care, based on the proposals of this working group, which were presented recently to the Tánaiste and myself.

The needs of family carers have not been ignored in this process. The working group has recommended that enhanced support and recognition of the role of family carers should form part of the development and implementation of policy for long-term care and I am delighted to endorse this recommendation.

I am very much aware of the fact that family and informal care is a cornerstone of future long-term care policy. Over the coming year, the Government will be looking at such issues as the needs of the carer in a needs assessment process, the development of respite services and training for carers.

These are but the first steps in achieving our vision of a coordinated, comprehensive, accessible and sustainable system of delivering services and supports in the community to people who need care and the their carers.

The Tánaiste and I, with the full support of our colleagues in Government are committed to making this vision a reality. The provision of supports to carers is one of my principal priorities and I am pleased to announce in this Budget a range of measures which will benefit carers.

This year will see the biggest ever increases in the rates of payment to carers:

• the rate of Carer's Benefit will increase by €17.00 to €180.70 per week
• the rate of Carer's Allowance will increase by €26.40 to €180 per week for a carer under age 66, and
• the rate for carers over age 66 will increase by €30.20 to €200 per week, making it the single largest welfare entitlement apart from over 80's pensioners

These represent increases of over 17% for recipients of Carer's Allowance and will serve to acknowledge and support the invaluable work of our family carers.

In addition, I am delighted to announce a range of other improvements including:

• an increase in the rate of the Respite Care Grant to €1,200 from June next year
• an increase in the number of hours which a person can work and still receive a Carer's Allowance, Carer's Benefit or Respite Care Grant from 10 to 15 hours per week
• an increase in the income disregards for the means test for Carer's Allowance to €290 for a single person and €580 for a couple

This means that a couple with two children can earn up to €32,925 while the Carer receives the maximum rate of Carer's Allowance.

This increase in the means disregards also fulfills the commitment in the Programme for Government to enable all those earning up to average industrial earnings to qualify for Carer's Allowance.

I am extending the duration of the Carer's Benefit scheme to 2 years per care recipient from May 2006.

I understand from my colleague, the Minister for Enterprise, Trade and Employment that he proposes to extend the Carer's Leave scheme, which allows for the protection of the carer's employment rights for the duration of the caring period, to 2 years duration.

This is a most significant Budget for carers, not only in terms of expenditure on income supports from my own Department but also in the realisation of this Government's vision of structures and supports for carers and the people for whom they care. I should stress that these initiatives for carers are on top of the new €150 million homecare package announced this morning by Tánaiste and Minister for Health Mary Harney.

The sustained economic progress of recent years has driven unemployment to historically low levels and we have become ever more reliant on inward migration to fill job vacancies and sustain economic development. Despite this, there are still significant numbers of people of working age who are not economically active and who are at risk of, or experiencing, poverty.

The proportion of people of working age who are receiving a weekly social welfare payment has remained more or less constant at around 20% for the last 15 years at a time when the economy has been transformed. While the numbers of unemployed people have fallen, the number of lone parents and people receiving illness and disability payments has risen. This is partly as a result of societal changes, such as greater acceptance of lone parenthood and improvements in social provision, such as the introduction of Disability Allowance, Community Employment schemes and other new schemes.

I believe that it is vitally important that as many welfare dependent people as possible are facilitated to take up employment and to avail of education and training opportunities to prepare themselves for the marketplace. This is not an expedient to reduce social welfare expenditure.

Employment gives people economic independence and a route out of poverty. It empowers them and gives them self respect; it gives them opportunities to develop their full potential and opens the way for them to participate fully in society.

People seeking to leave welfare dependency have to confront many difficulties on the way. My Department has a very important role to play in facilitating the transition to work through the range of employment supports that we provide. It is also true however that the fear of loosing a social welfare payment can discourage people from taking up employment opportunities.

As part of my reform programme, I am delighted to be able to announce a number of further improvements to the means testing arrangements and the main employment support services in this Budget which are designed to ease the transition to work.

These include:

• the introduction of a tapered withdrawal rate for Disability Allowance and Blind Pension recipients who engage in rehabilitative employment or self employment and have a weekly income over €120 and under €350, which will benefit are approximately 2,600 people
• a reduction in the qualifying period for access to the self-employment strand of the Back to Work Allowance, from 3 years to 2 years on the live register and in the qualifying period for the employee strand from 5 to 2 years. Furthermore, periods spent on Supplementary Welfare Allowance and Direct Provision Allowance will also count towards the calculation of the qualifying period
• the introduction of a 50% tapered withdrawal of earnings between €60 and €90 per week for persons in receipt of rent and mortgage interest supplement
• many of the organisations and individuals that I have met over the last year have emphasised to me that many people are discouraged from taking up employment or increasing their earnings for fear of loosing their rent supplement. Under the new arrangements, a person earning the minimum wage of €7.65 per hour and working for 20 hours per week will now retain almost 50% of their additional income. In addition, if this person has children they may also be entitled to a payment under the Family Income Supplement scheme. FIS payments are disregarded for the purpose of the rent and mortgage interest supplement schemes
• an increase in the spouse’s income disregard for entitlement to the Qualified Adult Allowance (QAA) from €88.88 to €100 a week and make a similar improvement in the spouses earnings disregard for a number of assistance schemes

I will end at this stage even though I have not commented on all the changes being proposed in this Budget. Full details are available in the Budget Fact Sheet published by my Department. It is a generous and far reaching Budget. It is a Budget that allocates a record breaking €800 million on increases to social welfare payments and initiates a new social reform agenda including:

• funding for targeted initiatives that further recognise and reward Carers
• increases in incomes for the most vulnerable older people
• specific measures to tackle child poverty issues
• introduction of supports that further empower Lone Parents
• and promoting activation through back to work, training and education supports which enhance choices for welfare recipients

Minister's Speech Ends