"Opening Statement By the Minister for Social And Family Affairs Séamus Brennan, T.D On the Consideration of The 2005 Departmental Estimates By The Select Committee on Social And Family Affairs"

1. Introduction
2. Budget 2005
3. Budget Overview
4. Breakdown of total expenditure

5. Sources of funding
6. Exchequer-funded payments
7. Social Insurance Fund
8. Conclusion

Introduction

I wish to thank the Select Committee for Social and Family Affairs for the invitation extended to me to appear before it to discuss my Department's estimates for 2005. I would appreciate the opportunity, before addressing the details in the Estimates, to take a few moments to outline to Members my views on the central role of my Department in delivering, not just an efficient and effective payments system to social welfare customers, but also its importance as a vehicle for reforms of our social security system.

My Department is the biggest spending department in the State, with a budget this year of over €12.2 billion.

To break that down into real terms, it means that for every €3 that is spent by the State in 2005 €1 goes on vital welfare supports, payments and entitlements.

Week in, week out, my Department delivers payments to over 970,000 people that, when dependants are taken into account, directly benefits more than 1.5 million men, women and children in a population of 4 million.

So for hundreds of thousands of our most vulnerable and deserving people, the supports from my Department form the safety net that keeps them out of the grip of poverty and exploitation, that gives most pensioners a decent State income, that supports lone parents as they struggle to bring up their children, and that helps carers to continue their valued and valuable work.

But I am also increasingly of the view that my Department has an even more important and influential contribution to make to the Ireland of the 21st century.

Of course funding and income support are the main responsibilities of my Department.

But that responsibility must go further and it must go deeper.

I am strongly of the view that my Department has a responsibility to use that generous funding for income and other supports to help tackle and try to solve the social problems behind the payments being made.

I do not think that it is sufficient to salve our collective conscience by having schemes for child poverty, lone parents, pensioners, those on disability and the unemployed, on the basis that if we pay the bill and sign the cheque the problem will go away.

No. We must deal with the social issues behind the payments.

The issues that are the very reason why we must make the payments.

Surely it behoves all of us to work towards a time when there is no longer a need for a particular payments scheme because, slowly but surely, the social problem behind it has been confronted and solved.

It is not sufficient in this economically vibrant 21 st century Ireland to institutionalise our problems, to lock people into poverty traps, pay the bill, brag about the amount of social welfare we pay, and then convince ourselves that this is truly progressive and enlightened social policy.

The reality is that social reform must go deeper, social policy must penetrate the layers of payments and reach to the heart of the problem.

I am committed to exploring solutions to our social problems.

Currently I am engaged in examining many of the social issues that blight modern Ireland and that must be tackled in a pragmatic and practical way, while at the same time maintaining and increasing the supports and entitlements that are the lifeline for so many of our welfare customers.

In this regard, I would welcome your constructive views, suggestions and proposals so that together we can improve the lives of so many who today feel marginalised and are facing uncertain futures for themselves and their children.

I will now outline the main aspects of my Department's estimates.

total spending on social welfare included in the Revised Estimates Volume has increased by €1 billion or by 9%, from €11.3 billion in 2004 to reach its highest ever level of €12.3 billion this year
this corresponds to about 28% of total Gross Current Government expenditure and over 9% of Gross National Product

Accordingly, this level of expenditure is highly significant not only in terms of overall Government expenditure but, more importantly, in its direct impact on the daily life of almost everyone in the country.

Each week, payments are made to around 970,000 persons while a further 545,000 families receive Child Benefit each month.

When administrative costs are excluded, my Department will spend nearly €12 billion in supporting the elderly, children, those who are ill or have lost their jobs, carers and others who need our support. This demonstrates clearly that the Government is living up to its commitments to protect the least well off in society and I look forward to continuing that progress in the years ahead.

Budget 2005

Early last October, just over a week after I became Minister for Social Affairs, I had the pleasure of attending our annual Pre-Budget Forum which involved a wide range of welfare organizations.

In my address, I indicated that it was important:

that we ensure that the fruits of economic growth benefit all as distinct from the few, and
that the resources of my Department are targeted on help those most in need, in order, not alone to raise their standard of living, but to ensure that everyone is a valued citizen who makes their own individual contribution to society

I delivered on those objectives in the complementary Estimates and Budget processes for 2005 by securing an additional €1 billion to tackle disadvantage by substantially boosting the levels of welfare payments for those who depend on them. The Budget set out to reduce the gap between those at the bottom and those higher up on the income ladder and to lift those who are most vulnerable, those struggling on the margins, and those for whom my Department is the last safety net.

In the Budget, I increased the main social welfare rates:

a €14 per week special increase for those in receipt of the lowest rates of payment. This represented an increase of 10.4% or more than 4 times the projected rate of inflation for this year
a €12 weekly increase in pensions resulting in new rates of between €166 - €179;

Increases ranging from €7.90 to €10 in the rates of Qualified Adult Allowance, thereby ensuring that these rates were maintained as a proportion of the relevant personal rate

Child Benefit rate increases of €10 and €12, increasing the rates to €141.60 & €177.30. This means that Child Benefit has increased four fold in 10 years
the highest ever increase in thresholds for Family Income Supplement with a rise of €39 per week
an increase the rate of Maternity Benefit from 70% to 75% of reckonable earnings

The commitments in the Government Programme , the National Anti-Poverty Strategy and Sustaining Progress are the key elements in the Government strategy in relation to those on lower incomes. In particular, Sustaining Progress contains specific commitments in relation to the achievement of the NAPS targets on the lowest rate of social welfare payment and child equivalence levels as well as existing Government commitments on improvements in Child Benefit and increasing the rate of the basic State pension to €200 per week by 2007.

As I said in the House at that time, the underlying objectives of Budget 2004 were:

to make significant progress towards the achievement of these commitments
to make a real difference to those at risk of poverty, especially families, the unemployed and those unable to work because of age or disability, both in terms of income and in other supports given to them via the social welfare system
and to recognise the contribution being made by carers and the demands on them

This I have clearly delivered. In addition to the rates increases already mentioned, the Budget package also provided for a range of other improvements including:

an increase of €165 in the Respite Care Grant bringing the Grant to €1,000 and its extension, with effect from the beginning of this month, and subject to certain employment conditions, to persons providing full time care and attention
substantial increases in the income disregard for Carer's Allowance. This now stands at €540 per week for a couple thereby making real progress towards the Government objective of bringing the disregard up to the level of the Average Industrial Wage
an increase of €120 in the earnings limit for entitlement to Carer's Benefit, from €150 to €270 per week
an easing of the capital assessment arrangements for welfare recipients. From the beginning of this month, the first €20,000 of savings is disregarded. An old age pensioner, with no other means, can now have almost €28,000 and still qualify for a maximum old age pension. This figure is doubled for a couple
substantial additional funding for Family Resource Centres, for Marriage and Family Counselling, the Family Mediation Service and Comhairle

Finally, members of the Committee will recall that I gave a commitment to the House last year to review the measures introduced by my predecessor as part of Estimates 2004. As a result of that review, I concluded it was appropriate to reverse some of them and to ease others. These changes were introduced as part of the Budget & Estimates packages.

The key changes included the amendment of the six month rule and other conditions for entitlement to Rent Supplement, including an increase in the income disregard in the means test. The Estimates also make provision for the transfer of €19 million in funding from the Rent Supplement Scheme to the Vote of the Department of Environment, Heritage and Local Government for the new Rental Accommodation Scheme under which local authorities will put a range of measures in place to meet the long-term housing needs of rent supplement recipients. This new Scheme is being progressively implemented over a three year time-frame and it is anticipated that some 5,000 recipients will have transferred to it by the end of the year. Other changes introduced by me related to the MABS, Crèche and Diet Supplements, Back to Education Allowance, the transitional half-rate payment to recipients of One Parent Family Payment and half rate Child Dependent Allowances to recipients of Unemployment and other benefits in certain cases.

Budget Overview

Its is certainly worth noting the analysis of independent commentators on Budget 2005. The ESRI, in its post-Budget commentary stated as follows:

"A systematic analysis, using SWITCH, the ESRI tax-benefit model, reveals that the direct tax and welfare provisions in Budget 2005 were indeed quite progressively structured with the greatest gains for those with least income"

The Combat Poverty Agency in its analysis noted that:

"Budget Policy has a key role to play in the implementation of the National Anti Poverty Strategy directly, through the achievement of minimum welfare targets, and indirectly, by reducing relative income poverty. This analysis shows that Budget 2005 has made significant strides in meeting the €150 per week welfare target with its headline €14 increase in personal welfare rates."

These comments, from the foremost independent social and economic experts, demonstrate the Government's commitment to protecting those at highest risk.

It is also important to note that, for the third year in a row, the social welfare package was larger than the tax package announced by the Minister for Finance.

When we came into office in 1997, the level of spending on social welfare was €5.7 billion per annum. Social welfare expenditure is now €12.3 million or more than double 1997 expenditure. This is all the more remarkable when one takes account of the drop of 104,000 persons in the number of unemployed from June 1997 to date.

The levels of increases provided in Budget 2004, in conjunction with the increases provided over the period from 1998, demonstrate the Government's continuing commitment to safeguard and enhance the living standards of the most vulnerable in our society.

Over that period (1997-2005):

the rate of Old Age (Contributory) Pension has increased by 81% or a real increase, in excess of inflation, of nearly 39%, while
the rate of the lowest rate of payment has increased by 79%, or a real increase of over 37%

Breakdown of total expenditure

As I stated earlier, social welfare expenditure in 2005 will be about €12.3 billion. For the Committee's information, I will provide a brief overview of the areas to where this money goes.

the largest amount goes to old age pensioners, who receive 24% of total expenditure.

Widows, Widowers and One Parent Families account for 16%

Child Related Payments, mainly Child Benefit, take up a further 17%
17% also goes on payments related to Illness, Disability and Caring
unemployment now accounts for just over 9% of my Department's total expenditure, while Employment Supports amount to a further 2%
11% goes on a range of other supports such as Free Schemes, Supplementary Welfare Allowance, Bereavement Grant and Family Supports
the remaining 4% is spent on administrative expenses such as staff pay, accommodation and IT expenses

Sources of funding

Members of the Select Committee will be aware that the Exchequer still makes the most significant contribution in terms of resources as it funds all assistance based schemes and universal schemes, such as Child Benefit. However, employees, employers, and the self-employed, also make a significant and valued contribution to the social welfare system through the operation of the Social Insurance Fund.

Exchequer-funded payments

Exchequer funding is expected to amount to nearly €6.6 billion in 2005. This is broken down as follows:

the largest single category of Exchequer-funded payments is Child Benefit, at nearly €2 billion. This represents an increase of over 400% compared to expenditure in 1997
the second largest category is One Parent Family Payment, at expenditure of nearly €770 million. This is an increase of 11% over last year
Supplementary Welfare Allowance, which comprises a range of supports including basic weekly payments and Rent Supplement, comes third at nearly €702 million, an increase of 9% over last year
unemployment assistance, at €690 million provides for an estimated weekly average of 77,500 recipients in 2005
the fifth highest area of social assistance expenditure is Disability Allowance at a cost of €636 million in 2005, an increase of 17% over 2004, reflecting the Budget increases in rates, as well as an expected increase of 4,600 in the number of recipients
members have details of further spending in the briefing material provided by my Department

Social Insurance Fund

Of the €12.3 billion expenditure almost €5.7 billion is provided by way of contributions to the Social Insurance Fund. The combination of the solidarity and the contributory principles, which underpin the operation of the SIF, are heavily influential in the design of income support programmes and are a practical example of social partnership in action. The social insurance system has been significantly enhanced over the past 20 years and is now a truly comprehensive system. Coverage has been extended to self-employed and part-time workers as well as public servants recruited since 1995.

Conclusion

A key principle that underlies the Estimates before you today is that the Government is committed to protecting the less well-off in our society and to ensuring that the rising tide of economic growth benefits everyone. Certainly, significant challenges await us, for example, in the areas of child poverty, ensuring adequate pensions for the future and supporting young families, to name just a few of the issues with which I am currently grappling. However, I am confident that the determination exists to tackle social exclusion and poverty and to build a fair and inclusive society where people have the resources and opportunities to live life with dignity and to make a full and valued contribution to their communities.

I think it is worth reminding ourselves that today we stand in the doorway of the 21st century.

For all of us I believe it is a good time to consider for a moment how the generations that follow will look back and assess the contribution all of us here today, and politicians in general, have made to the shaping of modern Ireland.

I have strong personal views on this.

I don’t believe for a moment that these future generations will base their judgments on how many millionaires, even billionaires, we created out of Ireland’s exceptional economic surges.

I believe that, and rightly so, they will judge us on how we honestly and sympathetically harnessed the fruits of that economic buoyancy to reach out and reach down to help and lift those who feared they were being left behind by the rising tide of economic growth.

I earnestly believe that right now all of us have a unique opportunity. It is more than an opportunity. It is a responsibility.

We are the people who can shape the future Ireland so that it benefits all of our citizens.

How well we do that will be our legacy.

At the end of the day what legacy could be more rewarding and more lasting than to hand on to future generations an Ireland that has eradicated social injustice?

An Ireland that is free of the greatest evil of all-poverty.

I commend these Estimates to the Committee.