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Social Welfare Bill 2012: Second Stage (Continued)

Tuesday, 11 December 2012

Dáil Éireann Debate
Vol. 786 No. 1

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(Speaker Continuing)

[Deputy Willie O'Dea: Information on Willie O'Dea Zoom on Willie O'Dea] Social Justice Ireland and a number of other organisations, which have no political axe to grind and no affiliation to any party but simply tell it as they see it, have stated unequivocally that last year's budget, the first introduced by this Government, was regressive. While previous budgets were cruel and harsh and they hurt a great number of people, they were at least progressive.

  According to the Economic and Social Research Institute, ESRI, as a result of last year's budget the income of the poorest 40% of households decreased by between 2% and 2.5% while the income of the richest 30% decreased by only 0.7%. As stated by Social Justice Ireland and the ESRI, in its initial report, all the indicators are that this budget continues the trend of favouring the better off at the expense of the less well off. In its commentary on the budget, Social Justice Ireland said:

Budget 2013 is unjust and regressive. For the second year in a row this Government has introduced a budget which is deeply regressive both socially and economically. Socially, it hits people on low income more than the better off. The cumulative effect will be devastating.

It could be devastating. For example, one family could be hit by some or all of the following: the reduction in child benefit, abolition of the PRSI allowance, the property tax, the trebling of prescription charges, the cuts to the back to school clothing and footwear allowance, abolition of the back to education allowance and the increase in the drug repayment threshold. For a family which is already vulnerable and in poverty, the cumulative effect of these changes, on top of last year's changes, will be a devastating affect on its already precarious situation.

  As regards the poverty line and basic social welfare rates in this country, some recipients of social welfare do not rely totally on their basic social welfare payment. Some receive ancillary benefits such as the respite care grant, living alone allowance, fuel allowance, free travel allowance and free household benefits and so on. In most cases, the net effect of these ancillary benefits is to bring people close to the poverty line. Rarely do they bring people over that line. These are the precise benefits which the Government has targeted.

  The Government has stated that it intends to make the following savings in 2013: €17 million from cuts to the back to school clothing and footwear allowance, €4 million from the cuts to the farm assist scheme, €33 million from cuts to jobseeker's benefit, €6 million from cuts in social welfare exceptional needs payments, €11 million from cuts to the back to education allowance, €26 million from cuts to the respite care grant and €81 million in total from cuts to household benefits, including electricity and telephone allowances, which amounts to a grand total of €178 million in savings. On 8 November last my colleague, Deputy Sean Fleming, asked the Minister for Finance, Deputy Noonan, by way of parliamentary question what would be the yield to the Exchequer if the rate of universal social charge on the incomes of employees and the self employed which exceed €100,000 were raised. The proposed increase in this regard was 3% on the part of their income which exceeded €100,000. The Minister replied stating that such an increase would yield €200 million to the Exchequer. The sum of €200 million exceeds €178 million. We understood from the media that it was the policy of the Labour Party to support this proposal and to have this increased universal social charge imposed on high earners. Had the Labour Party not caved in but succeeded in doing this, the Government would have had €200 million extra to play with and none of these cuts would be necessary.

  The Government was faced with a simple choice, namely, to increase tax on high earners or punish the poor. The Government chose the latter option. That choice was not dictated by the troika, the IMF, EMU, EFSF, ECB and so on. It was the choice of Government. It had freedom of choice to take a little more from the rich or take a lot, relatively speaking, from the poor and it chose the latter. I do not propose to embarrass the Minister by quoting all that she and the Labour Party said prior to the last election. However, I will say this. Many of the votes which the Labour Party - I know this because I canvassed in many areas outside of my constituency - received in the last general election were based on its promises not to cut child benefit. That is a fact.

  A previous Administration, led by Fianna Fáil, made a choice which I believe was the wrong one. When faced with a situation whereby child care was grossly under-developed and the choice was to invest in the development of a proper child care system or increase child benefit substantially to enable people pay for child care themselves it chose the latter option. While there were arguments on both sides and the issue was well debated internally, the then Government opted for the latter choice. It would not have been my choice but that was the choice made. The result is that child care in this country remains grossly underdeveloped. An OECD report in 2012 estimates that families with children in this country spend up to 41% of their disposable income on child care, which is double the OECD average. Child care is a significant cost for families. This has come about not by chance but because of a deliberate decision. One either has the money to pay for child care or one has a properly developed system that does not cost too much. If we continue on the current course we will have neither. That is the reality. In 2010, the then Fianna Fáil led Government increased child care benefit by approximately 300%. This was recognised by the current Minister, Deputy Burton, when on 10 December 2010, almost two years to the day, she stated:

I congratulate Fianna Fáil on past increases in child benefit. Child benefit has succeeded in lifting children out of poverty.

Barnardos has stated that the combined cuts to child benefit and the back to school clothing and footwear allowance this year will cost the average family with three children €606 per annum on top of the additional cost of €383 per annum last year, which when combined amounts to almost €1,000 per annum. The Irish League of Credit Unions published a survey recently which stated that 2 million people, half the population, have only €100 per month disposable income left after they meet all essential bills. These two reductions amount to 60% of that sum. Taking this change, in conjunction with the tax on maternity benefits and the cut in the back to school clothing and footwear allowance, Ms Niamh Ó Ceallaigh, spokesperson for a leading parent's group, said it is as if the Government does not want women to have children. Allied to the cuts in child benefit is the decision to tax maternity benefits. This will affect 46,000 women and will yield €40 million for the Government, which means that on average a woman who gets pregnant and has a child will be €833 per annum worse off. What I object to most about this change is the spurious reason for it given by the Minister for Finance on budget day. He said the measure is designed to correct an anomaly in the tax system. He also made the point that other short term social welfare benefits are counted for tax purposes and maternity benefit was not. If it is an anomaly in the tax system, it is one with which we have lived for many years. It is coincidental and surprising that just as the country is at its nadir and women are under the worst possible pressure the Minister falls in love with uniformity in the tax system and makes this change.

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