Wednesday, 12 March 2003
Dáil Eireann Debate
“3.–The Minister shall, as soon as may be, after the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the adverse financial effect to lone parents in returning to the workforce under the FÁS Jobs Initiative Programme and to report on the number of lone parents who have seen a reduction in their weekly income as a result of recent wage increases under the Programme.”.
As I said to the Minister for Social and Family Affairs on Committee Stage last week, an amendment is necessary to provide for lone parents who are involved in FÁS schemes. Such people have received an increase of €10, but they have lost €60 from their lone parent payments. I hoped the Minister would deal with this matter this week to assist those who are trying to return to the workplace and to better themselves so they will not be a burden on the State at a later stage. It is wrong that people who are receiving training so they can get a job should lose out, but they have lost €60 because the Government has not raised the ceiling to take account of the €10 increase. I will call a vote on this matter if it transpires that the Minister has not considered this amendment in the past week.
People on the job initiative scheme will also be affected. The ceiling pertaining to PRSI has not been increased and therefore they find that they have to pay PRSI. People who have been unemployed for many years and who joined job initiative schemes to be retrained to re-enter the work force find themselves being penalised simply because the Government gave them an increase of €10.
The failure to raise the PRSI ceiling had a knock-on effect. This is wrong because the people affected are the most vulnerable in society. They find it difficult enough as it is and the payments they are getting are not great. I hope the Minister can resolve this issue today. As she said on Com mittee Stage last week, it will affect only 400 people.
Mr. Ring: The Minister should increase the ceiling. Because the lone parents got an increase of €10 they are losing €60. The Minister should deal with this today and I hope she will respond positively.
Mr. S. Ryan: On Committee Stage, I felt the Minister understood the case the Opposition was making on behalf of some of the most marginalised in society and the effect the legislation was having on them. I hoped and expected that she would re-examine the issue to see what could be done.
The fabric of local communities is being damaged and the viability of several community employment schemes is being diminished. Community arts organisations are under serious threat. Amendment No. 13 refers to the necessity to deal with the problem of lone parents being hit by the failure to raise the PRSI threshold following the increase in pay in the job initiative scheme. This problem also renders the people concerned ineligible for the rent allowance.
The failure to adjust the threshold to correspond with the pay increase is putting the average male participant on the job initiative scheme into a different category, thus reducing the value of his increase. Furthermore, the requirement to be unemployed for five years or more to qualify for the back to work allowance is cynically restricting the possibility of finding suitable candidates for the scheme, and this is effectively terminating it.
The failure to make adjustments is affecting income, the ability to encourage people to come back to work, the benefit of that work to the community and the chances of attracting the right calibre of people into the scheme. I hope for a positive response from the Minister on all these issues.
Mr. Penrose: My colleagues have made an eloquent case and we spoke about the issue last week on Committee Stage. The problem in question is not just confined to Dublin. Last Friday, a young girl at one of my clinics stated that she had received a small increase. However the impact of this increase was to diminish her lone parent's allowance significantly. It also had an impact on her rent allowance.
The failure to raise the threshold will certainly have a significant impact. As Deputy Ring stated, about 400 people will be affected. However, this is not a huge number and therefore it should be possible to deal with the issue. Failure to raise the threshold will also result in a poverty trap, which I feel is not the intention of the Minister. She indicated on Committee Stage that she would dis cuss the matter with FÁS. Has there been a positive outcome to these discussions?
There are some significant development companies, set up on a voluntary basis, to bring people back into employment. The job initiative scheme is very worthwhile and its participants are involved in very important community programmes. Many people employed on them are paid a gross amount which is below the threshold for payment of PRSI. If an annual pay increase is made by FÁS and the annual PRSI threshold is not increased accordingly, participants become eligible to pay PRSI, which they would not have had to pay beforehand. When trying to co-ordinate all the relevant schemes it is difficult to ensure that their intent is not damaged by a failure to make necessary provisions in respect of PRSI.
On 6 January FÁS increased the gross weekly pay for job initiative participants from €286.35 to €298.40. The threshold figure below which PRSI was not payable in 2002 was €287, but this has not changed in 2003. Therefore the weekly gain from the increase of €12 will be neutralised. The increase by FÁS, made to keep wages in line with inflation, will be seen as a failure because of this anomaly. Some participants will stop availing of other benefits if the threshold figures are treated as per the PRSI sector.
There is much concern about this matter in the voluntary sector. As my colleague has said, lone parents can lose up to €60. I know one who is losing €53 or €54. Therefore, they will drop out of the very scheme in which they are encouraged to participate.
The Labour Party will press amendment No. 13 and support that of Deputy Ring very strongly. We gave the Minister an opportunity on Committee Stage to examine the matter, bearing in mind all the various bodies involved. I hope she has had positive discussions and will adjust the threshold to ensure that the people who are most in need do not lose out at this critical time.
Minister for Social and Family Affairs (Mary Coughlan): As promised on Committee Stage, my officials and I have taken on board the issues raised by the committee and there was contact with the Department of Enterprise, Trade and Employment.
We must examine the job initiative scheme and the policy approach. As we all know, the scheme is one of the FÁS schemes in which many lone parents can participate. The intention of the policy is that people will gain a foothold in the jobs market through the scheme. My Department has taken into consideration the concerns that have existed over the years in terms of why people do not progress.
That is the reason we have a substantial income disregard of €293 per week for lone parents. Deputies will be aware that an increase in the payment to those on the jobs initiative scheme brought their income above the disregard. I have had discussions with Members of the House and  officials from my Department and the Department of Enterprise, Trade and Employment to establish what can be done to address this anomaly. I am not in a position to increase the income disregard because of the effect of such a measure on consequential schemes. There is also an equality issue in terms of people on unemployment assistance and unemployment benefit who do not receive income disregards and would be justified in thinking we were more favourably disposed to others. It is our opinion that those who reach the threshold and are still entitled to the transitional payment outlined on Committee Stage will also be entitled to family income supplement.
Family income supplement is provided annually and the thresholds are updated at every budget. This means the issues which have arisen with regard to the jobs initiative scheme will not be problematic. If someone is above the threshold, they will receive the jobs initiative payment from FÁS, a reduced one parent family allowance and family income supplement which will bring their payment levels back up. After 12 months, the one parent family allowance will be reduced, but the family income supplement will increase while the thresholds will change at every budget. It is not a perfect solution, but it addresses the concerns which have been expressed by the Members of the House which I share. If this approach is agreed, we will progress with family income supplement and my Department will facilitate the 400 or so people affected with an application form. The difficulty with a threshold is that someone will inevitably reach and exceed it. We are seeing the consequences of that. Substantial tax credits mean that in the cases I have outlined, lone parents do not pay income tax. I agree that overall the treatment of lone parents in the tax and social welfare codes is very favourable. Many Members will have been made aware of the OECD report which indicated that Ireland is the member state most favourably disposed towards and supportive of lone parents within the EU.
With effect from the 2000-01 tax year, all employees covered under classes A, B, C, D, E, and H with reckonable earnings of not more than €287 per week have been exempt from making an employee social insurance contribution. The introduction of the exemption was informed by the negotiation of the Programme for Prosperity and Fairness and was principally designed to increase the net pay of those on lower incomes. If the PRSI exemption thresholds were raised to €298.40 per week to facilitate those currently taking part in the jobs initiative scheme, they would have to be introduced for all employees within the same earnings band. To differentiate would be inequitable and discriminate against other categories of lower paid worker. The most recent figures available indicate that to implement such a measure would affect approximately 21,300 employments and cost in the region of €7.1 mill ion in a full year. Therefore, it is not proposed to adjust the threshold at this time.
Class A employees with reckonable earnings of over €287 per week pay a social insurance contribution of 4% up to the employee earnings ceiling. Due to the flexibility of the jobs initiative scheme, the income earned exceeds what would constitute a normal take home pay for many on low pay. I am not in a position to change the PRSI exemptions which will have to remain as they are this year because of financial implications. It would be unfair and wrong to change the exemptions for people on the jobs initiative scheme. If they were changed, the measure would have to be introduced for all workers who find themselves at the threshold.
I hope the concerns of Members are addressed to some extent. I can provide them with an information note on the matter and ask my officials to facilitate those who require an application for family income supplement.
Mr. Ring: To be fair to the Minister, she has gone some way towards addressing the problem that has arisen through the recent payment increases in the FÁS scheme. I have spoken on Committee Stage about family income supplement which can be retained by those whose incomes rise during the year, but cannot be increased in the cases of those whose earnings fall. There is no appeals mechanism in place which means they have to wait for the annual review.
I understand the Minister's difficulty. If she increases the threshold for family income supplement, she will have to do it for all other schemes with inevitable knock-on effects. However, the Minister and her Department must examine this area to encourage people to do better for themselves. We are trying to get people to retrain and re-enter the job market. We do not want them to find that they are worse off if they adopt that course of action. Those on the jobs initiative scheme will question the loss of €60 and wonder about the effect on their rent supplement which might lead them to give up the payments to return to one parent family income. That is not good for society and it is not good for them. We want them to enter employment.
I have received much correspondence from a number of groups, particularly in the Dublin area, who are put out by this scheme. They feel it has a negative effect. I cannot criticise the Minister for making an effort to address this issue. We must wait to see what the knock-on effect will be on the people involved. I understand the costs to the taxpayer of providing threshold increases in all schemes, but the small number of people  involved led me to believe the matter could be dealt with within the Department.
Mr. Penrose: I understand the Minister is somewhat constrained in dealing with this problem. We have received a great deal of correspondence on the matter which has a direct impact on people who are doing their best to escape the poverty trap. I realise the Minister fears dealing with the issue may create a different element of discrimination in the social welfare system. How many people will feel the impact of an increase in the threshold from €287 to €298.40? I heard the Minister say the cost would be €7.1 million.
The Minister is obviously aware that she must deal with this in some fashion and she has taken cognisance of some of the points made. However, it is important that something be done for the communities affected, particularly the participants in the jobs initiative scheme.
Acting Chairman (Dr. Cowley): Before we conclude, I am to inform the House that Report Stage amendments to the Social Welfare (Miscellaneous Provisions) Bill 2003 in the name of Deputy Seán Ryan should also be in the name of Deputy Penrose. A printing error is responsible.
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