I thank the Cathaoirleach and members for the invitation to attend today to present the 2022 Supplementary Estimate for the Department of Social Protection. I am seeking a Supplementary Estimate of €722 million for 2022 and the purpose of this Supplementary Estimate is to address a shortfall in funding for my Department, which is required because of three main drivers of additional expenditure on Vote 37 in 2022. These include a range of once-off cost-of-living measures announced as part of budget 2023, including the Christmas bonus, additional expenditure related to supports responding to the Covid-19 pandemic and additional funding to provide much needed support to refugees fleeing the war in Ukraine under the temporary protection directive. I was pleased to announce, as part of the record social welfare budget package worth €2.2 billion, a range of cost-of-living measures worth almost €1.2 billion to be provided early out of 2022 funds to provide support for people as soon as possible. I am deeply conscious of the cost-of-living challenges many people are facing right now. Energy prices have risen sharply and the cost of the weekly shop has gone up considerably also. Government wants to help and that is why the additional payments in October, November and December will put money into the pockets of older people, working families, carers, and people with disabilities. This wide range of lump sum payments will help to ease the burden on our most vulnerable over the winter months as an integral part of the comprehensive budget package to provide assistance to households in dealing with the rising cost of living. In framing the budget, our aim was to ensure the support being given would be delivered in a timely manner, would benefit households throughout the State and would be progressive in nature by targeting supports towards those on lower incomes in particular.
I believe the overall package of support represents a robust response to the substantial bills and expenses that households are currently facing. These supports are estimated to cost approximately €1.3 billion overall, of which €789 million is for Vote-funded schemes. The cost-of-living supports that are paid to people in receipt of payments from voted schemes is met entirely by the Exchequer. As members will be aware, there is a current-year surplus on the Social Insurance Fund, SIF. This means that the cost-of-living supports paid to those on social insurance schemes have been funded from the SIF, without recourse to funds from the Exchequer. As the cost-of-living supports were not included in the original Estimates for the Department, and unless equivalent savings on other schemes meet the entire cost, a Supplementary Estimate is required in order to ensure these essential supports can be paid. In the brief provided to the committee, we have separately included the additional expense of the cost-of-living supports, including the Christmas bonus to be paid for each scheme, showing the effect of these supports on the requirement for a Supplementary Estimate. This table also provides the outturn position on the various schemes prior to the payment of the cost-of-living supports, which eases comparison between the original Estimate and the Supplementary Estimate. I hope the committee finds this approach useful.
The balance of the Supplementary Estimate is required to meet a net overspend on the schemes and services delivered by my Department. In February 2022, a Revised Estimate of €23.35 billion was considered by the committee for projected 2022 social protection spending. This Estimate was based on Government decisions that had been made at the time. Although it was anticipated that Covid-19 impacts were receding, there was no indication that a few short weeks later, the war in Ukraine would start. This led to very significant additional Department spending both directly, through a range of income supports to refugees, and indirectly through its significant and ongoing contribution to the global cost-of-living crisis, which ultimately resulted in the cost-of-living package measures I have already set out. I will go through the key issues behind that in a little more detail now.
Additional voted expenditure of €199 million arises on the employment wage subsidy scheme, EWSS, in 2022 due to the impact of the Omicron variant. Covid-19 restrictions were reimposed in December 2021 and January 2022 for certain sectors, resulting in a surge of expenditure in January 2022 and the ultimate extension of the EWSS to the end of May 2022.
I have provided the committee with full details of all schemes, where the projected end of year Vote expenditure deviates from that projected in February 2022.
Government has provided a very significant response to support social protection recipients in the face of the cost-of-living pressures which manifested during 2022. Additional payments totalling €1.3 billion have and will be made, including: €116 million in measures earlier in the year, including fuel allowance and back to school clothing and footwear allowance; and almost €1.2 billion for the autumn cost-of-living double week and additional lump sum payments.
Critical supports estimated to cost €244 million on voted schemes will be provided to directly support the 65,000 refugees who have sought shelter in Ireland, fleeing the war in Ukraine under the protection of the EU’s temporary protection directive. I have provided the committee with full details of all schemes, where the projected end of year Vote expenditure deviates from that projected in February 2022 due to the impact of the expenditure on payments for people fleeing the war.
On a positive note, the position of the Social Insurance Fund in 2022 has changed significantly from the one which required an Exchequer subvention this time last year. Social Insurance Fund PRSI income to the end of 2022 is projected at approximately €14.1 billion. This is one very welcome result of the exceptionally strong labour market recovery in 2022. This is almost €1.5 billion or 12% more than was estimated in February. Fund expenditure is now projected to be just over €12 billion, which is €715 million or 6% more than had been projected. This means that no Social Insurance Fund, SIF, subvention is required from the Exchequer in 2022, and the Social Insurance Fund will carry over a surplus currently estimated at €2.06 billion into 2023 – a fact which is hugely welcome.
Taking account of the altered pattern of spending I have highlighted, it is now projected that overall Social Protection spending in 2022 will be €24.79 billion. This is a difference of €1.44 billion over the February 2022 Revised Estimate. Not all of this €1.44 billion is being funded through the Supplementary Estimate - there is €715 million in additional PRSI income over that previously estimated, leading to a surplus of over €2 billion which funds the social insurance scheme additional requirements. Taking account of this, the total Supplementary Estimate required to meet the shortfall on voted schemes is €722 million.
This €722 million comprises: an additional €710.9 million for schemes and services funded from Vote 37; and an additional €21.6 million on administration. Combined, this amounts to €732.5 million, of which €10.5 million is offset by additional appropriations-in-aid receipts.
Looking at key areas of expenditure: €788.9 million is required to fund a range of once-off cost-of-living measures to people receiving payments funded from Vote 37; €244 million is required to fund additional expenditure on a range of schemes to provide essential support to people fleeing war in Ukraine under the temporary protection directive; and €198.8 million is required to fund additional Covid-related spend on the employment wage subsidy scheme and part-time job incentive following the Omicron variant earlier in 2022. In total, this additional expenditure amounts to €1,231.7 million.
However, we also estimate savings totalling €509.8 million on a range of schemes funded from Vote 37, mainly due to a strong labour market and lower live register. The net amount sought therefore is, as I stated, €722 million.
Before I finish, as we approach the end of yet another extraordinary year, I want to take this opportunity to acknowledge the staff of the Department of Social Protection. In 2020 and in 2021, the staff went above and beyond to ensure people were supported through the worst of the pandemic. I strongly believe in the fullness of time, we will look back on the swift and effective delivery of the pandemic unemployment payment as one of the single most important actions to ensure that we had social solidarity in Ireland during those dark periods when widespread restrictions were in place across our country.
Sadly no sooner had the threat of Covid begun to recede, when we had the break out of war in Europe earlier this year. Ireland stands with Ukraine and the staff in the Department of Social Protection have acted with speed and efficiency to provide PPS numbers and payments to the tens of thousands of families, mainly women and children, arriving in Ireland from Ukraine.
The war, of course, has also precipitated a cost-of-living crisis, the likes of which we have not seen for decades. Energy prices have risen dramatically, and the cost of the weekly shop has gone up. We all know people are feeling the pinch. As members of the committee will be well aware, it has traditionally been the case that social protection measures announced in the budget would normally take effect in January at the earliest and, indeed, in some cases it could be spring. This allows time for the Department to carry out the necessary IT development work and system changes. I have learned since coming into the Department that when one is dealing with millions of people’s payments, it is not just a case of flicking a switch to make a change – there is a lot more complex work to it than that. I recognise the extraordinary efforts of the Department's IT teams to ensure that as we sit here today, six lump-sum payments have already been paid out to more than 1.5 million people and the seventh, the €500 carer's support grant, will issue to 115,000 carers this week. Sometimes we can take it for granted that all of this will happen on time and on schedule and the money will automatically be in people's bank accounts or post offices. That is not the case – it takes a huge amount of work by an awful lot of people. What the staff of the Department of Social Protection have done in the past few years in the face of the pandemic, a war and a cost-of-living crisis is the definition of what public service is all about. The fact that they have managed to do all of that and keep on top of their normal day-to-day workload of processing payments for pensioners, carers, job-seekers and everything else they do is all the more remarkable. Therefore, I take today as an opportunity to record my thanks to the staff of the Department of Social Protection in the local offices all across the country. We all deal with them through our constituency offices and while, no more than ourselves, they cannot solve every problem, they always do their best to help. I want to recognise their efforts today.
I thank the Chair for allowing me the opportunity. I am happy now to take any questions from the committee on the Supplementary Estimate.