We are delving deeper into the broader implications of means testing in the social welfare system. The committee is embarking on a module focused on this subject. We are especially keen on examining how means testing aids in directing social assistance payments and shaping the system's operations.
I again welcome Mr. Egan, Mr. Flynn and Ms Hardiman and invite Mr. Egan to make his opening statement for this session of the meeting.
I thank the committee for the opportunity to discuss the broad area of means policy and assessment in the Department. The Department operates a number of social assistance schemes where, in order to qualify for the payment, the person must satisfy a means test. A means test is a way of checking if a claimant has enough financial resources to support themselves and determine what amount of social assistance payment, if any, they may qualify for. Social assistance schemes in operation in the Department cover all the Department’s programmes throughout the course of life, from supporting children, through supporting those of working age and into supporting people in retirement. Schemes include jobseeker’s allowance, farm assist, one-parent family payment, disability allowance, carer’s allowance and the non-contributory State pension. These schemes help to ensure people without adequate means are provided with income supports by the State in order to alleviate poverty. The CSO’s Survey on Income and Living Conditions, SILC, shows poverty rates both before and after social transfers and it shows Ireland’s social protection system is extremely effective in alleviating poverty. Ireland continues to be one of the EU’s best performing countries for the poverty-reduction effect of social transfers. Without social transfers, the at risk of poverty rate would have been 34.1% rather than the current rate of 10.6%. This represents a poverty reduction effect of 68.9%. That is from this month's recently published SILC statistics.
As part of this overall system, means testing certain payments ensures the State’s resources are directed towards those who are in the most need of financial support. The Economic and Social Research Institute, ESRI, has regularly reported the benefits of targeted, means-assessed interventions as being particularly effective in the context of poverty reduction. These social assistance schemes differ from the Department’s social insurance schemes, which are dependent on a person’s social insurance contribution. However, while the personal rate is not means tested, any increases for adult dependants, which may be awarded to a person on a social insurance payment will include a means test in respect of the qualified adult. Means assessments take income and capital, such as savings, investments and property other than the family home, into consideration. For social assistance schemes, income and capital belonging to the claimant and their partner, where applicable, is generally assessable for means assessment purposes. Cash income that is assessed includes any income from employment or self-employment, income from a social security pension from another country and rental income. Capital includes all moneys held in financial institutions or otherwise, the market value of shares as well as houses and premises owned by a claimant which may or may not be put to commercial use. Property personally used, such as a claimant’s home, is not included in the means assessment.
All the claimant’s sources of income are added together and considered when deciding whether they qualify for a means-tested payment or the level at which they are paid. Many schemes support payment at a variety of rates linked to the assessed level of means, thus avoiding cliff edges in relation to a payment. Decisions on means assessments are made by deciding officers. If a person is not satisfied with the decision, they may ask for a review of the decision or make an appeal to the social welfare appeals office. The specific rules for assessment of means can vary from scheme to scheme depending on the nature and purpose of the scheme. Sometimes a certain amount of income or income from particular sources is not considered for a particular scheme, and these are usually referred to as income disregards. There are earning disregards for most schemes as well as general disregards specified in legislation which include certain social welfare income, foster care allowance, specific compensation payments and payments on moneys received from an approved charity.
The Department keeps means tests under regular review. The Minister has introduced a number of significant changes in this area in recent years. These include: providing for higher earnings disregards for disability allowance, blind pension and the one-parent family payment; expanding the list of agri-environmental schemes that qualify for a disregard, which was increased in recent budgets; and the introduction of the rent-a-room disregard to enable recipients to support those arriving from Ukraine and others in what is a tight housing market. The latter disregard was expanded recently. In 2023, significant changes were introduced to means eligibility rules for fuel allowance, which have resulted in over 35,000 additional households joining the scheme so far. In 2022, there was a significant increase in the income and capital disregards for carer's allowance. This enables more carers with modest incomes to become eligible for the scheme and allows carers and their families to earn more from employment while retaining their payment. As part of budget 2024 this was further increased to €450 for a single person and €900 for couples from June of this year. To support access to third level education, the Minister recently introduced an income disregard linked to UCD's largest scholarship programme.
The Minister has initiated a review of means testing in the Department. The aim is to complete it by the end of this quarter in order for it to be submitted for the Minister’s consideration. It is the Minister’s intention that the report will be published once she has considered it in detail. The outcome of the review will be used to inform decisions regarding any further changes to means testing, including in the run-up to budget 2025, although all prospective changes to means-testing arrangements will have to be considered in both an overall policy and budgetary context.
We look forward to hearing the committee’s views on means testing and we are happy to assist with any questions.
I thank Mr. Egan. I will now invite members to discuss the topic. I remind those participating online that they should use the raise hand function in Microsoft Teams to indicate that they wish to speak. Deputy Donnelly will begin.
I welcome the review. It is a really important thing to happen. When we have constituents contacting us there is sometimes a cliff edge in that people have a certain income and once they are marginally over it they are either entitled to a payment or they are not. I am wondering whether we look at sliding scales. Some schemes involve such scales. Is that what is looked at in the implementation of every scheme? In other words, if somebody is €50 or €100 over the limit, could we make it that they not automatically excluded from it? I think, in particular, of adult dependents or somebody who is working while being a carer. I listened to one on the radio this morning who had been entitled to €9 and when this was reassessed it became €18. That is a full-time carer. That was based on someone else's income. We often find that there is an adult child in the house and the income of the parents is taken into account in relation to unemployment assistance, for example. That is really unfair. These are adults in their own right, yet they are assessed on the basis of their parents' income.
It is slightly unfair that they are considered adults in every other sphere of life, but the parents are the ones who are relied on to give them pocket money. Has that been considered?
There are cliff edges in social welfare systems but they are predominantly around working patterns. For instance, a person on jobseeker's allowance or a jobseeker's benefit payment cannot work more than three days in any consecutive seven-day period. If that person works on a fourth day, he or she is not entitled to the payment for that particular week. There is a sliding scale when it comes to the means test; it is a tapered payment. Once a person has a euro, depending on his or her means, it gives that person entitlement to the payment, albeit at a small level, but it can also trigger secondary payments such as fuel allowance or other entitlements.
As for the increase for the qualified adult and the means review, there is a cliff edge for qualified adults in receipt of a social insurance scheme with means in excess of €310. It is a tapered scale for an adult with any means below that figure. If a social insurance recipient has means of less than €100, he or she receives the full qualified adult payment. If the qualified adult has means between €100 and €310, the payment is tapered on a sliding scale. There is a cliff edge. As regards the purpose of the means test, however, there is an expectation that people who have reasonable levels of income and capital are in a position to use those resources to support themselves. If a person qualifies for a means-tested payment, that means they are not in a position to support themselves fully or on a tapered level. The idea behind this is that social welfare expenditure is directed towards those most in need. This drives the reasons the social welfare system is so effective in poverty alleviation, as I referred to earlier in the context of the survey on income and living conditions. However, the purpose of the means review is to look at issues such as the one the Deputy highlighted. As I set out in my opening statement, changes have been made in recent budgets to make the means test more generous, but it is an ongoing process and part of the review to further inform budget 2025.
I thank Mr. Egan.
I have a few general observations. I welcome that the means test is being reviewed. On a slightly separate point, in general I like universal programmes and am philosophically of the view that if a taxation system is adequately progressive and people pay according to their means, everyone should be in a position to benefit. If a welfare state is only for the poor, then it will be a poor welfare state. Against that argument, there are limited resources and decisions must be made; there is obviously a need to ensure limited resources are targeted at those who need them the most.
I wish to give a perspective from my constituency office on means testing, when it comes up most often and when people feel most frustrated. I can see both sides to the matter, but one example of frustration is people who come into my constituency office to say that they have not qualified for X, Y or Z. This is usually pensioners. They say they worked hard and did not drink or smoke or go on too many holidays. They saved and did the right thing but are now being told that they do not qualify. While I know that the witnesses are marshalling limited resources and targeting the resources at those who require it the most, I wish to give that insight.
An issue to which I am more sympathetic relates to the pension situation of women who may not have worked most of their life, or at all, or may have worked for seven, eight or nine years until they got married or such. Usually, a woman in that situation is a qualified adult on her husband's social welfare payment. If she applies on her own, she will not qualify for a payment. This means there is a lack of independence there. I recognise that it is a household and I understand where the witness is coming from, but it sometimes means there is a lack of independence.
In some cases, alarm bells go off in the Department for whatever reason, rightly or wrongly, and the Department looks for the devil and all: past transactions, how a person maintains himself or herself, how he or she affords to go on holidays and different things like that. This can happen. Sometimes it is justifiable and sometimes it is more questionable. There are cases where there are legitimate question marks but, to be honest, I have come across cases where details were sought in respect of things that happened 30 or 40 years ago. That approach is over the top. These are general observations and the witnesses can respond on them as they wish. The issue of female pensioners who are qualified adults is of particular importance.
I wish to raise a more detailed issue relating to maintenance. While I welcome that this has been dealt with in legislation, the means testing of kinship carers is still an issue. To be fair to the Minister, Deputy Humphreys, she came back to me looking for examples of the issue. Kinship carers often have to foster children, usually relatives, unexpectedly. If the kinship carers receive contributions from the birth parents or the natural parent, the contributions are taken into account - maybe in policy, but certainly in practice - in the means testing. We provided a number of examples of this to the Minister. I made a request to the Minister's office for a meeting between Kinship Care Ireland and the Minister to discuss this. I think that would be the most fruitful thing. The problem is not necessarily with the means test itself but it is related to it. By definition, a contribution is, or traditionally has been, considered to interfere with the concept of full parental abandonment. It seems that this issue is treated as an absolute; if there is €50 for a birthday, or if there is a one-time payment of €200 and no more for five or six months, that is considered to be an interference with the concept of parental abandonment. That means that these kinds of payments can interfere with the guardian payment being available to the kinship carer.
I wish to look for one additional point in my notes but I invite the witnesses to respond on those general observations and the issue of kinship care.
I thank the Deputy. I take his point on his ideological perception of the social welfare state. I flag that Ireland is an unusual social welfare system in a European context. Almost all our EU member state colleagues have social insurance contributory-based systems. Ireland has a dual system; there is social insurance with significant social assistance schemes. It is about how the resources are limited and targeted. Our budget of almost €26 billion is substantial within the Irish economy. We know it is well targeted but is important to highlight the strong social insurance contribution perspective. We see that with the high number of contributory State pensions in particular but also with other significant insurance schemes, such as jobseeker's benefit. The Minister has the intention to bring in pay-related benefit, with maternity, paternity and parental benefits, as well as illness benefit. There is a significant insurance base. If the eligibility and social insurance contribution criteria are satisfied, those benefits can be accessed irrespective of means. The means components are those that do not have that social insurance contribution.
Therefore, there is a strong safety net for people, provided they satisfy the contingency of the original payment. That is the strength of the Irish social welfare system. Obviously, with a means tested approach, there are points where people fall on either side of where the means test is drawn. I can understand the points raised by the Deputy and other members about people’s perception and frustration if they fall on the wrong side of the test. The purpose of the review and of several budget measures that have been introduced in previous years, and what the Minister has done, is to increase key aspects of certain means tests to make them more attractive, whether that is for farm assist or the carer's allowance or to encourage people to go back to education. These are all positive, progressive steps in terms of how the Department treats means but it is all done within an envelope in terms of other community resources as part of the budget cycle.
Qualified adults can get a proportion of the payment paid directly to themselves. That would help as regards the independence argument. If there are issues there, in that this might not be possible on the home front, the Department has protocols in place to enable a qualified adult to contact the Department and we can make that payment directly to the individual. That would be handled carefully from the Department’s perspective. As I said previously, as regards qualified adults, irrespective of whether the payment is insurance based or social assistance, there is a means assessment. That is something we will look at as part of the review.
On kinship carers, I am not au fait with the example highlighted by the Deputy. If he has the details, we will happily follow up and come back to him on the specific case. As he said, we have just introduced the new legislation on child maintenance. I just want to be clear that I have a firm understanding of how that impacts or does not impact in the kinship care case the Deputy highlighted. We will revert to the Deputy in due course.
As I was speaking, it occurred to me that it is related to a means test but is probably not strictly speaking a means test issue. The Minister is not here and Mr. Egan cannot commit on her behalf, but my main request is to have a meeting on this with the Minister.
Kinship carers are entitled to the guardian's payment, non-contributory, on the basis that there is parental abandonment. The problem is that it is very strictly defined and that, operationally, financial contributions by the natural parent or birth parent can often be considered to contradict whether there is full parental abandonment or not. It is not strictly about the whole sum of money that is coming into the household and the means test in that regard but it is related to the means test because if there is money coming from a particular place, the amount itself, whether big or small, is immaterial. Practically speaking, it can mean the Department, probably at deciding officer level, has treated it as a contradiction of parental abandonment. Obviously, care needs to be taken that people are not trying to cod the system and so on, but typically that is not the case and we have provided a number of practical examples of people who have been caught by this and the amounts of money involved have been relatively small.
As I said, my primary request is for a meeting. There was previously a meeting at deciding officer level with Kinship Care Ireland, which is a part of Treoir, at which the deciding officers indicated they were unaware of any change. This occurred in recent months, even though the legislation was progressing at that time. The operational changes are now in place and the legislation has passed. I am not expecting Mr. Egan to have a comprehensive answer. He probably understands what the issue is. I request a meeting with the Minister so that we can resolve it because it can be resolved.
We will follow up with the Deputy and take the details. We will make the Minister aware of his request and revert to the Deputy on that basis.
I thank Mr. Egan.
I thank the officials for the paper. I understand it is fairly general because they are still working on the report. It is very timely that we are having this meeting and I am glad to make an input to it, looking at the matter from a broad point of view.
I will first address the means testing of capital. Normally thrift is encouraged in any state. I have found that because they worry about the future, people on low incomes are sometimes very thrifty. I have met people in very poor housing who worry - wrongly, technically, but that does not stop the worry - that they will not be able to afford a nursing home or some other contingency and so they do without and save money. The second general statement I will make on saving is that it is fair to say that, over the years, the State has been encouraging couples to have joint accounts. If there is one full-time homemaker in an earning couple, it is generally perceived in society that it would be good practice for the couple to share all the income because it is just a particular division of labour as to how they organise their lives.
Generally-speaking, the Department does not count the first €20,000 of income and it ignores the first €50,000 of income for the disability allowance and carer's allowance. After that, for the next €10,000, it assess it at €1 per €1,000 per week, which is equivalent interest of 5%. The next €10,000 is double that again, which is 10% per week. After that, you hit the wall and it is assessed at 21% per week. It is interesting that with the medical card, there is a choice of doing it on the nominal system or using real interest earned. For the past ten years, there has been no need to place a bet on that because it has been a 100% certainty that any sane person with a lot of savings will opt for the actual interest earned. That will have been nil in some cases, less than 1% in other cases and above 1% only in very rare cases. It might be a little more than that now.
Let us look at how this really traps people. In the case of disability allowance, over the years I have dealt with cases involving parents of highly disabled children who grow to adulthood. They will never have an opportunity to work and will never have an opportunity to work or make social security contributions. The parents, being hard-working, will own a house and have some savings. As often happens, parents die ahead of their children. Let us take a simple case where the parents die and leave a family home to be divided between two, three or four children, or whatever number of children they had. Let us presume the person who was highly disabled from birth inherits €150,000. In the case of the offspring who are in employment, there is no tax on that because an inheritance of that amount would not attract any tax. Mr. Egan will accept that. The one person who loses everything by getting something is the person on disability allowance because the Department wipes out the disability allowance.
I have been on about this situation, and the Minister knows about it. I recall one day in the Dáil when she was taken aback by the realities of this situation. This type of reality is not a rare occurrence.
The next issue we hit are contributory pensioners with an increase for an adult dependant. I am going to take the example of two couples to show how this thing needs reform and needs this reform now. In couple A, one person worked full time and the other was caring for children, parents, relatives and everybody. There are many people like that in this country. This was the case in the past as well, and there are many people who worked like this to rear their families who are now helping to rear their grandchildren to support parents in situations where there are two working parents. These people have made a ginormous contribution not to the State but to society.
Let us presume a good income was coming in here in this example, and if that all the income, including property bought, retirement lump sums and inheritances, of the pensioner - and I am specifically saying this about the contributory pensioner in this example, that is, the person who had been earning - was kept by this pensioner in his or her own name, then the full IQA rate would be paid. In other words, there is a very odd relationship in the context. Despite the fact the spouse was caring for people full-time, the actual pensioner kept everything, including all the savings, investments and everything this couple got. I do not think most people would think that was an ideal situation, unless there were some unusual circumstances.
Now, let us take an example of another couple, with the same amount of money, in a situation where they had put everything in their joint names. What happens then? The adult dependant would be assessed on half of the savings. In that circumstance, no adult dependant allowance is paid. Each of the couples in these examples would have the same amount of money, the difference being that in one case it is just in one name. The people who shared everything, those two people who loved each other in such a way that they shared everything and saw all their income as a household income and not as two personal incomes, will not get the increase for an adult dependant. In my view, it is mind-boggling how this can be considered fair.
It is well known that I believe we should be very generous. Some work has been done on this issue and the one-parent family payment. We should, however, be very generous in relation to means-testing one-parent families. We need to up the thresholds and the disregards. Generally, we need to make it attractive for people to earn income.
I would like to come to a general principle. I think it is fair to say that in the taxation system, when people hit a tax rate of over 50%, they consider it as coming into the level of a disincentive. If there are proposals from political groups suggesting there should be a tax rate of 60%, 70% or 80%, the argument put forth all the time by economists, and so on, is that there is a massive disincentive when we get to this level of claw-back of money earned by people. These may be very wealthy people, maybe even people earning millions of euro. It would be better to stimulate the economy and to allow these people to keep at least half their money.
In this regard, it is important to look at our general approach to income earned from self-employment. I refer to private pensions, and disability allowance and jobseeker's allowance, in this context. Generally speaking, it is a euro for a euro. Of course, there is a disregard for disability allowance but there is not for jobseeker's allowance. If somebody were to get some employment, the State thinks in this case it is okay to take 100%, and never considers that this is creating a massive disincentive for a very large number of very small people. This means it is very hard for them to get off the floor.
When we look at the fish assist and farm assist schemes, it is considered generous to leave the person who earns the money with 30% of it. The richest people in the country do not pay anything like this. We seem to think this is a good system and one that is fair and stimulates the economy. I remember being utterly shocked when I went to the Joyce Country first. Now, it was worse in those days and we are coming from a very dark and bad place. I was absolutely horrified when I found out about the situation of small farmers, and they were virtually all small farmers in the area. I would say eight out of ten households had some kind of a small farm. Many of them were depending on assistance schemes because Connemara land is not the best. In those days, it was 100%, and then there was the concept of the own produce consumed. This meant that if people cut their own turf and grew their own potatoes and vegetables, they had their jobseeker's allowance - because there was no farm assist scheme in those days - reduced accordingly. I remember when I came into this House I persuaded the Minister at the time, Deputy Michael Woods, to change this situation. It was one small step forward.
I think there are only about 4,000 people on the fish assist and farm assist schemes. It would be interesting to find out how much it would cost to take a very finite step and put those recipients at the same rate of penalty, or hand-back to the State, from their income as the richest people pay. I refer to 50%. This would be a 20% improvement in the situation. The witnesses are going to tell me about disregards for eco-schemes, etc. My own belief is that the disregards should not be for eco-schemes but for all European CAP payments. The charge on the remainder of the income is still 70%.
The next matter concerns jobseeker's allowance, farm assist and all the rest, including disability allowance. I refer to somebody who is on jobseeker's allowance, disability allowance or farm assist and what happens if the spouse or partner gets a job and goes earning. After the employee's PRSI is deducted, which is small anyway, let us say this person earns €360 a week. This person will now have lifted the family quite considerably, which is very desirable. The person has got employment and is working hard for their income. For the other partner receiving a payment from one of the schemes already mentioned, how is it possible to calculate how much will be taken off the family's social welfare payment? The €360 is taken and then €60 is subtracted from it. This leaves €300. This is then multiplied by 60%. We now have €180 remaining. Then this €180 of the original €360 is taken away from the social welfare payment.
Again, when one compares this to the high rate of tax one suddenly realises how penal it is.
I am sorry for going on so long but I have a finite agenda. The Leas-Chathaoirleach might indulge me because I did present this paper to the committee. Non-contributory pension means tests are a very interesting idea. Mr. Séamus Brennan brought in the provision, when he was Minister, that if a person gets a job then he or she has a non-contributory pension. In 2022, there were 97,727 non-contributory pensioners. In 2013, there were 95,801 non-contributory pensioners but when the increase in population is taken into consideration the number has dropped quite dramatically.
If a person earns €200 a week then that is not counted for the means test but there is a snag. For whatever reason, the Department regards an income of €200 a week earned from farming or fishing as self-employed income so it is not disregarded. Let us say there are two people who each earn €200 a week but one is in a PAYE job and the other is self-employed. One gets to keep the full pension and the other, with the exception of disregards for the agri-environment grants, loses a €1 per €1 out of the pension. Probably the biggest single group of people who are on non-contributory pensions are small farmers and fishermen. Why? Because they were not allowed to pay PRSI for many years and if their income is not over €5,000 they still cannot pay PRSI. What would it cost? Nothing.
In the last year, I had a case where a person was brought to court because he had not declared his or her full income from fishing and the State wanted 100% of the fishing income back. The case went back years and he owes a big debt to the State. At the stroke of a pen we could change the wording of the provision to say "any income earned up to €200 a week by a non-contributory pensioner is disregarded". Such a provision would save the Department a lot of time spent chasing people.
In the last week I had a case where it was alleged, and there is no evidence of this although I have written asking for the evidence, that somebody who is literally living from hand to mouth had an income from picking periwinkles. This man is a pensioner. If the Department has noting better to do - it is not the departmental officials' fault because they are only following the law - and thinks this is useful and should not be corrected then I am a little bit surprised.
When the rural social scheme was introduced the idea was that if a person joined the scheme, he or she could keep his or her income. The rural social scheme was taxable but once a person was eligible to join the scheme then he or she got to keep all of the farm income. Therefore, if a person worked 19 hours a week then he or she got the same pay as somebody would get who is on a community employment, CE, scheme or whatever. Suddenly, the rules changed and the same anti-enterprise view was taken. Now a single person who joins the scheme gets the basic rate. Ironically, a couple who joins the scheme will only get the top-up amount for working 19.5 hours because the full assessment of the farm income is taken into account so there is no gain from being on farm assist. When I wrote my report the top-up amount was €22.50 and I think it has been increased to €23. It means it is still less than €1 an hour for the work and that is regressive. The scheme was purposely designed to work the other way and be a stimulant to farmers to make the fantastic contribution that they can make. If anyone goes around the rural parishes of Ireland and wonders at all the beautifully maintained green areas, sports facilities, halls and all the rest then one will see that the rural social scheme has made a fantastic contribution. Every community would say that because these are highly-skilled workers who are used to working.
The rule changed in 2016 although I could be wrong about the year. I have repeatedly tried to get the figures from the Department on how many people with a dependent adult, child or children have joined the scheme since because simply it is not worth their while. The only people for whom it is worth their while joining the scheme now are single people with no dependants.
I have summarised some of the more glaring, urgently needed changes to the scheme. We do not need to wait years to start making the necessary changes. We do need reform and we have needed reform since long before I was in politics. I have worked for 50 years and grew up in a situation where means testing never entered my life but things changed when I became a co-operative manager in the west of Ireland. Then you would hear people saying that the people of the west would not work. The people who made that comment really did not understand that 100% of the income that people would have earned from these small farms, fishing and so on would go straight to the State. As I said, I predicate my case on the fact that the richest people think it is not worth working if they do not get to keep 50% of their income for themselves yet we expect the people who are least well off to live with what to me is an absolutely Victorian means-testing system. I am not saying this personally. I am saying this system, and long before the time of our guests, is Victorian and urgently needs reform.
At one stage my proposed changes were estimated to cost €50 million. I do not believe they would cost that much because the stimulus given would far outweigh that. Even if it did, as pointed out earlier, the percentage is very small when one subtracts €50 million from the Department's spend of €27,000 million. I thank the Leas-Chathaoirleach for his indulgence.
I gave the Deputy latitude because he has consistently raised this issue over the lifetime of this committee. Our guests have a fair number of issues to tackle.
I do genuinely appreciate the indepth examples given by Deputy Ó Cuív. It is important for us to hear the consequences of some of the schemes and rules, and how we have implemented the rules. The comments will be factored into the means review that we are currently preparing. The Deputy went into a huge amount of detail.
Yes, there is no need for the officials to reply to each of my questions today.
I thank the Deputy. I do not disagree or dispute anything that he has said but a lot of the issues are a consequence of over 20 years of social welfare. In particular, we are in the process of catching up with the changes made between 2008 and 2013 and we have not caught up fully in many of those cases. Over the last six budgets we have made over 30 means-related changes. They have been improvements. The changes do not address all the issues flagged by the Deputy.
As I said, it is showing the Minister’s commitment to making progressive changes. Those last six budgets have each contained measures for some of the schemes the Deputy highlighted. I cannot comment on the cost. The Deputy mentioned €50 million in the context of the Department’s overall budget. As the Deputy is aware, the way we engage as part of the budget process is everything is operating off the estimated level of service for the continuation of what we have for next year. That €50 million additionality comes out of the additionality, so it is actually a much smaller percentage of the larger envelope available in terms of budget context of new money, for want of a better term. However, I take the Deputy's valid point that €50 million out of the total budget is a small percentage. We are back and forth with colleagues across Government, particularly with the Department of public expenditure, in respect of budget discussions.
The Deputy mentioned capital. We have made changes in the capital assessments for some but not all our schemes. We will be looking at capital levels as part of the means review. It is trying to get the balance between prudent savings levels and the targeting of resources. We are also conscious that this will be an increasingly important issue for single pensioners who do not own their home because they will need reserves of savings to fund private rental accommodation during their retirement and, therefore, more savings to pay for that rent. That is coming down the tracks at us and we need to be aware of it.
Regarding qualified adults, the qualified adult rate for people of working age is basically about 66% of the main payment. We know the actual cost of another adult in a household is typically about 1.5 times. When there are two adults, the cost typically multiplies by 1.5 and we are paying about 1.66. Looking at pensioners, the IQA for over 66-year-olds is almost 90% of the primary payment. We are conscious of that with regard to how we look at this and the consequence. I am-----
That is not the issue I raised.
The Deputy was talking about joint accounts.
I am talking about the means test and the IQA. It is only on the wealth or income of the dependent. Some people knew, for example, to put all the savings in the pensioner's name if they were the earner. In most cases it was the male earner. I would say that was 80% of the cases I came across. It is unbelievable that people get penalised for putting things in joint accounts and that the person who knew the rules and put it all into one account was not means tested, effectively.
I think the Deputy’s example of couple A and couple B makes that clear. However, from the Department’s perspective, the information provided to us is the basis on which we make the decisions.
There are two scenarios. One is a couple where one dominated and another one is where couples know the rules and can avoid this pitfall. Then there are people who shared and never bothered to check. They never even dreamt that they would be penalised for putting everything together. I have had pensioners who have inherited properties and needed to put the couple’s name on it. I had one farmer who owned the farm all his life and somebody advised him to put it into two names about three years before he came to pension age.
With regard to example the Deputy highlighted, from an equity perspective, there is an argument there that all means are added together and then simply divided by two, irrespective of whether they are held in single or joint accounts. That way, both couples will be treated identically.
They cannot. The pensioner has a contributory pension. How can you penalise them?
That is if they are applying for an increase for a qualified adult though - just in relation to the increase for the qualified adult, not for their personal rate and payment.
Once again, remember, there were marriage bars. Many coupled reared families because it was the habit. The numbers are going down. The obvious thing to do is not start the third world war. We have enough with Putin trying to start a war without the Department of Social Protection. I am suggesting to go the other route. There is a decreasing number of these. They are there because it was the mores of society at the time and, in many couples, one reared the children. They performed huge contributions to society. My view is to go the other way and relax dramatically the income assessment on the dependent adult. Basically, the main earner in that situation thought they were getting a contributory pension for both of them. That is the way the whole society worked. As I said, many were not allowed to work because they were in public service jobs and the marriage bar came up. One thing the Department is always worrying about, as is certainly the Department of public expenditure and reform, is the long-term consequences. Will the numbers go up? Is that not right? It is an everyday scenario. Are the numbers going to go up? Does this open an open sesame? The reality is when you look at it, the number of dependent adults of contributory pensioners is going down. I have it here. In 2013 there were 68,000 contributory State pension qualified adults whereas now there are 51,000. It is a decreasing cost and generosity here will not cost anything because that figure will continue to go down. Into the future, with the childcare, most women will have the ten years. It is mainly women; let us be straight about this. We had the referendum about this whole issue and the people of Ireland gave a clear message that it is a choice. We should not be forcing people by economic necessity - that was the operative word.
We will let Mr. Egan have a run because I think we have gotten as far as the second question in the response. There are quite a number of issues and I am conscious that a number of other members are looking to come in as well after Deputy Ó Cuív.
The Deputy highlighted and is right that IQAs of pensioners are reducing. We also imagine that trend will continue. The changes we made to the contributory State pension and recognition of periods of care will have a significant impact on that over time as well. We expect more people will qualify for the contributory State pension. There will be less non-contributory State pension and less increase for qualified adults on contributory State pension on foot of those pension changes we introduced at the end of last year that took effect from January.
The Deputy talked about the incentive effect and someone working for €360 a week on jobseeker’s allowance. If my sums are correct, that household will see their income rise from a full-time jobseeker’s payment of €386 on the basis of no child with the additional income, leaving aside reducing for the means the Deputy highlighted, to an increase up to €566. Therefore, there is a net benefit. Roughly around 45% to 48% of household income has increased. I accept the points the Deputy made and he is absolutely right. When we look at jobseeker’s payments, we look at replacement rate. Across the OECD, we should be looking at a replacement rate ratio of around 70%. That is typical. Anything above that and you are into disincentives. It is higher than the percentage the Deputy articulated based on the research from the OECD, and in the case the Deputy highlighted, it is actually below that 70% threshold.
That said, looking at people on the live register, we have seen consistently since Covid, and this trend was before Covid as well, a reduction in people availing of jobseeker's support and taking up employment and a proportionate reduction in casual jobseekers. The policy objective of Government is to move people from an unemployment support and the household into employment, and we are seeing that. It is a balance. If you start incentivising part-time employment significantly, there is a risk you could trap people unintentionally in receipt of a jobseeker's payment. I know that is not the intent the Deputy is highlighting. We will take on board the point the Deputy has highlighted. That applies to the vast majority of social assistance that is means tested.
I will have to revert back to the Deputy on the rural social scheme. The top-up payment is €27.50 a week. It has increased from the €23 the Deputy highlighted but I take the point the Deputy has made. I am not familiar with the change in the rule the Deputy highlighted. I will have to revert back after speaking about that to colleagues who have responsibility for the rural social scheme, but I will also keep that-----
Initially, when the scheme came in, if you had €100 a week in farm income, that is, assessed farm income after the means test with farm assist, when you went for the scheme, that was left to you and you got the full amount of money for the work you did, the same as the person working beside you. That is as simple as it was. Then they made a change and if you had €100 assessed means against you going on the scheme, the net gain was only €27 whereas in the first case you got the €127. It is still not mega-beans but it is okay for 19.5 hours, and you got an A-class stamp as well. That was the attraction - an A-class contribution. That is the difference. One worked; the other did not. The numbers have gone down. We cannot get them.
We will come back in respect of the numbers. As for the numbers on that scheme, the Deputy is correct. They have fallen. We will revert back on that basis.
The Deputy mentioned self-employed income. We are also looking at that as part of the means review but any changes there will have to be done in line with principles we are developing across the board to ensure consistency and fairness. That would be farm assist, State pension non-contributory, jobseeker's allowance and disability allowance. We need a consistent approach to how we treat self-employed income and that will be part of our principle approach in the means review as well.
How does Mr. Egan explain to pensioners, specifically non-contributory pensioners, how €200 PAYE is different from €200 self-employed? That is a simple question.
When it comes to the self-employed, as the Deputy will be aware, allowable business expenses are reduced.
No. They come off. It is net income. We know that.
That is the current rule we operate.
What is the rationale behind the difference?
That goes back to what we want from the means review. We want to look at that rationale and see if it is still valid and, second, approach it from a perspective of having consistency and a principles-based approach that is fair for all in how we treat self-employed income.
Is that all of the Deputy's questions addressed?
Yes.
I call Senator Wall, who has been waiting patiently.
I thank the Leas-Chathaoirleach and welcome our guests. Much of this has been covered by Deputy Ó Cuív but there are a couple of issues to pick up on.
Carer's allowance is something I regularly deal with, as do other members, I am sure. Notwithstanding the new means test that will come into effect in June, I still hear from a lot of people who are getting very little in payment. Is carer's allowance being considered as part of the means test under review? We need to get to a stage where there is no means test for carer's allowance given the wonderful work they do. I would like to get a comment on carer's allowance and the current means test on that.
An issue I brought up the previous day was the fuel allowance. I gave an example of a pensioner who does not qualify for fuel allowance because their gross income is above the threshold, but when the tax they pay is taken off, they would qualify. The reply I got that day was the means test is based on gross. This person is not qualifying for the warmer homes scheme. They live in a 50-year-old house which needs upgrading and this disqualifies them. Maybe I could get a comment on this. It seems grossly unfair that this person is being deprived of such a scheme because they are being assessed on gross rather than net income, which they obviously cannot spend.
I get a lot of queries at clinics regarding requests for bank accounts where a lot of these bank accounts are closed for a long number of years. Some of them are 30 or 40 years old and those applying have to go through banks, some of which, such as Ulster Bank, have closed down. What access has the Department of Social Protection to bank accounts? Does the Department know the details of a person's bank accounts? Most important, does the Department not know they are closed? It is a stress for people when they are told they have to supply bank account details, they go into a bank or try to get in contact with a bank and are told that is closed for 30 or 40 years. Maybe the Department would comment on that.
I seek a comment on the means test review. It is ongoing. When will it finish? When do we expect the report?
On the capital disregard, which I note Deputy Ó Cuív touched on as well, I come across a lot people, as I am sure colleagues do as well, who have saved for that rainy day, be it their funeral expenses or whatever. That brings in another question on the funeral grant but I will concentrate on capital disregard. The first €20,000 threshold is way too low. How old is that figure? I presume it is 20-plus years old. Mr. Egan stated in reply that it is being reviewed. It obviously needs to increase because it is causing a lot of stress for people who have that €20,000 for the so-called rainy day. The capital disregard of €5,000 for supplementary welfare is way too low for the people I deal with who have that bit of savings for a rainy day, such as funeral expenses, but are being disallowed on payments because the capital disregard is set at €5,000.
I agree with what Deputy Ó Cuív is saying about a qualified adult. I have had three cases in recent weeks. In one case, people put their money into joint accounts and they did not get the maximum qualified adult payment. The other two cases, thankfully, had them in the one person's account and they did get it. There is an issue there.
My final question or comment is on standardisation of means tests. There are, in my experience, differences between what is called for in a number of payments and what is needed. Will the review concentrate on standardising the means test that would make it much easier for people when they come into my office and, I am sure, colleagues' offices? The number of questions they are asked in a means test, in some cases up to 20 questions, is beyond comprehension for many people. It needs to be standardised.
On the carer's allowance, it will be considered as part of our means review. It is also being considered as part of an interdepartmental group the Minister has announced, with colleagues from the Department of Health, to look at carer's allowance. It will be covered by both reviews.
I hear the Senator's point about having no means test for the carer's allowance but, just to be aware, the Department believes such an approach would cost several hundred million euro. It would involve a significant cost.
On the fuel allowance, in social welfare means assessments earnings are typically assessed at a gross level but we subtract PRSI, union subscriptions and pension contributions. The approach with fuel allowance is in line with what the Senator articulated and that is set out. We do not deduct tax from our means-tested schemes in the way the Senator has articulated from a fuel allowance perspective. It would add to the complexity. There would be a significant cost associated with that. I do not have a figure to hand on what would be involved in that.
I will ask my colleague, Mr. Flynn, to come in on the bank accounts question.
We want to finish the means test review by this quarter.
I am conscious that a lot of contributions have been made this morning that we will have to work through in terms of the means review. We will have to touch base with the Minister following today's meeting in terms of timelines. However, it was the intention to do it by the end of this month. Many valid points have been raised but they will need to be carefully considered in the context of that review.
In terms of capital disregards, I take the point with regard to the levels. They have not been changed. The last time they were changed was back in 2005 for most schemes. In 2007, we increased the disability allowance from €20,000 up to €50,000. In 2022, we increased the carer's allowance from €20,000 up to €50,000 in line with the disability allowance. They are the last two changes.
I hear what the Senator is saying with regard to the supplementary welfare allowance, SWA, capital disregard being €5,000. In terms of his point about the standardisation of means tests, at the moment, we are looking at the review of core policies and principles that would be applied. We have more than 90 schemes in the Department, however. Not all of them are means tested, but there will continue to be different means rules for different schemes, depending on Government decisions in that regard. At this moment, therefore, I cannot see that there will be a single means test, but we will seek to standardise where it makes sense to narrow differences. Obviously, this will take a period of several budgets to align fully with what we are articulating in the means review.
I will ask my colleague, Mr. Flynn, to come in.
Further to what Mr. Egan said regarding the question about fuel allowance and warmer homes, the warmer homes scheme under the SEAI has a range of qualifying schemes, not just fuel allowance, although that is one of the major ones. A range of social welfare schemes other than fuel allowance provide access into that scheme.
On the point about bank account requests, the Department works with customers to get the information they require to support their claims, including in respect of means. We have to get the relevant information to support the customer's position. In respect of the bank accounts, this is very private information for individuals. We are very conscious of that and work with people to get the relevant information that is necessary to support that, while being mindful of the responsibility to the Oireachtas to manage the overall budget and being careful to ensure we are providing the relevant payment at the right rate based on the correct means evidenced.
There are a range of different capital assessments in place at the moment. As my colleague said, however, it is important that we are getting the principles right and getting back to the purposes of the schemes and why the assessments are at the rates that they are. Again, it is not a question of standardisation in terms of having a single means test. Obviously, the range of 60, 70 or 80 schemes the Department has provides for different contingencies. We do not think there is a one-size-fits-all approach, so we want to try to provide appropriate levels of capital assessment given the purposes of the underlying schemes.
I thank the witnesses. Unfortunately, however, the person to whom I refer does not qualify under the other means for warmer homes. The fuel allowance was the only way for her to qualify. It is wrong. Maybe the witnesses could look at that situation because she is only over the limit by €15. As I said, she has been disqualified from a very good scheme that she needs for her home.
What access does the Department of Social Protection have to bank accounts? I do not think we actually got a reply to that question. If I have three or four bank accounts, does the Department know I have them? Does it know how much I have in them? It is a question I get asked regularly. Maybe it is an answer we could get today.
My understanding is that the customer will provide the bank accounts to the Department on request.
I appreciate that. That does actually happen, but I am aware that people get requests relating to another bank account they are not even familiar with that has been closed. What bank account details does the Department of Social Protection have for people? In other words, does it know how many bank accounts a person has? I get a lot of queries in my office regarding a request in respect of a bank account that was not provided that ends in 309 or whatever the number is. When we follow that up, we find it is a closed bank account that has been there for 20 or 30 years. That is my query. What detail does the Department of Social Protection have with regard to bank accounts held by an applicant?
We will have to come back to the Senator on that particular question around closed bank accounts.
I would appreciate that.
Very good. Deputy Ó Laoghaire wanted to come in with a quick supplemental question.
I will try to be as quick as I can, although I am not sure how quick. There are actually four issues, but two are just for the record. One is to state my agreement with Senator Wall and Deputy Ó Cuív. Carers are probably among the most important people in the context of the means test. I am glad that is being reviewed. I am not totally sure how the two reviews relate to one other or how that is going to work, but it is very important anyway.
The Department has a role in the next issue I wish to raise if it is ever asked for advice. The Department has done a very progressive thing in terms of maintenance and means tests. It is something I welcome. It was a priority for my predecessor, Deputy Kerrane. I welcome the Ministers legislating on it. However, there are other Departments that have means tests that take child maintenance into account. I am thinking particularly of social housing, but also medical cards and other items. The Department is not in control of those schemes but, if its representatives are ever asked for advice in this regard, it is important that the rationale the Department had for removing child maintenance from its means test, and the social good that does, is explained to people.
My next two questions are both kind of annoying, so I apologise. One of them is abstract. I was not present for the previous discussion it as I was travelling. I listened to it on the Oireachtas app, however. It is a very good app; fair play to the Houses of the Oireachtas. We generally think of means tests in terms of what is right and good and what is in the interest of the recipients. I am curious as to the ability of a means test to provide an incentive or be a policy lever to achieve particular aims. To what extent is that considered? We were talking about possibly removing obstacles to people availing of the rent-a-room scheme. Does that ever arise in other contexts? We may believe it is desirable, for example, that more people might wish to remain as family carers in the context of pressure on non-familial care. That is only an example, but to what extent does the Department consider a means test?
The other annoying question concerns an issue that might make means tests might work better. It is related to means tests, but it is about qualifying payments and little anomalies. I am aware of an individual who does not qualify for the back-to-school clothing and footwear allowance because she is in a low-paying job but not on a qualifying payment. If this person had the same precise income or if she was paid through a community employment scheme, for example, and had a slightly higher take-home pay, she would receive the back-to-school clothing and footwear allowance. However, because she is not on a qualifying payment, she does not qualify. It is not strictly speaking a means test, but it is maybe an instance where a means test might be better. Obviously, there is an administrative burden in that, but this is somebody on a low income who does not qualify for the back-to-school clothing and footwear allowance because she is not on the right qualifying payment even though her income is very low. There can be similar situations with fuel allowance. A person might have an occupational pension but not a State pension, possibly as a result of the type of PRSI contributions he or she was making or an inadequate number of PRSI contributions. One example I came across concerns a person who was in the Defence Forces for a small number of years who became ill and did not have enough contributions for the contributory payment, but got an occupational pension. That person does not qualify for fuel allowance. Those examples are niche and I am not expecting the witnesses to have answers to them, but they might address them in their reflection on the means test. Sometimes there are other issues where people on low incomes can lose out on payments because of the technicalities of what is a qualifying payment and what is not.
I thank the Deputy. I acknowledge the two points he raised in terms of the carer's allowance and child maintenance.
The means test is a policy lever that is available to the Department. The rent-a-room scheme is an obvious example, as we have articulated. Consistently and for a considerable period of time, most of our schemes have had earnings disregard for employment. That has a specific purpose.
The purpose of these is to encourage people to find some form of part-time employment and help them financially and socially. The Department recognises the benefit of people taking up part-time employment because it is typically a gateway to full-time employment and progression out of the social welfare system. For some people, moving into more sustainable employment can be done on a gradual basis. It depends on each person's circumstances. A person's means is a policy lever for the Department. It can be effective. It is available to us but it is not an exclusive one. For the means review we are focusing on the principles and trying to bring a more consistent approach across the schemes. We are also trying to articulate where we envisage these tests will go over a period of time, subject to Government making final decisions.
Regarding the qualified payments, I am not 100% sure. A person would need to have a fairly low income not to qualify. If the person is on an income that is equivalent to that on a community employment scheme, I am surprised that they are not eligible for the back to school clothing and footwear allowance. I can talk to the Deputy later about the specific details of the matter.
Maybe it is a unique situation but the person is working in a job with a wage comparable to that of a community employment scheme. They work 19 hours and have a take-home pay of €214 and they also receive child maintenance, which is obviously not included. It is a very low income but they still do not qualify.
From what the Deputy has described, I think this person is eligible for the working family payment. If they have one child, the threshold for the income is €642. Obviously, with their income from employment, they will get 60% of the difference from their income from employment up to the €642. It is also an eligible payment for the back to school clothing and footwear allowance. If the person were in receipt of the working family payment, that would then trigger the back to school clothing and footwear allowance. The person should look into this but it obviously depends on their circumstances. I will ask my colleague, Mr. Flynn, to contribute.
The fuel allowance household-based payment has traditionally been linked to people being on a qualifying social protection payment. The big change made in the fuel allowance in the recent budget was the change for the over-70s in relation to the means assessment. It also provided that these applicants do not need to be on a qualifying social protection payment. This has been an expansion in terms of the means and also of the qualified cohort. This change is being monitored by the policy area for the effect on the scheme in terms of additional households qualifying without having to have an underlying social protection payment to trigger it.
That is a fair point. I would say very small numbers of people are affected but I will send on examples. This has a knock-on impact in terms of the warmer homes scheme which I want to flag as well.
The issue of carers needs to be considered in its own right. The means test is a huge issue. There are calls to abolish it and I understand the rationale behind the calls. However, I can hear the alarms bells ringing in Government Buildings and in the Department of Public Expenditure, NDP Delivery and Reform. In a situation like this, the income thresholds need to be increased. The Minister has been doing this by raising the income thresholds quite considerably and I want to compliment her on it. We need a continued progression. Perhaps then when we get to a certain level we will see that there are so few people above this threshold that we can abolish the means test. If that were to happen over a period of four or five years I could live with it. Sometimes in the big-bang approach, there can be unintended consequences. My memory is that when this committee was set up in 2020, it recommended €500 and €1,000. We got €450 and €900. I would love to think that we could go another step next year and keep going.
It can be very difficult in that every time we ask for data on what means testing change costs, we never get it. However, what we do know is that when the fuel allowance was dramatically increased, it did not require the amount of extra expenditure that had been anticipated. I have a feeling that many of the other changes I have suggested would not cost a lot and would indeed decrease over time.
Many people care for children who become adults. For these people caring for a very long time we have to take the social desirability of this into account, where possible, and make it affordable. It is very hard to beat the loving care of a family member. Carers need time and space but they also need means to be able to give that time and space. We need to move in that direction. There are much wider social policy issues involved than just means testing. Recent events have shown that the Irish people have ideas on this that politicians did not anticipate fully.
I thank the Deputy. I do not disagree. The Minister's approach has been one of progressive change. That is why she has requested this review to continue the process to factor it in to future budget discussions. As I said earlier, I do not think what we will articulate as part of the review will be done in a single budget but it will inform the future direction over time. I thank the Deputy for the detail he has provided. It is much appreciated.
I thank the witnesses. It has been a very wide-ranging session and they have shown themselves to be very open to detailed questions. That concludes the committee's business for today. I propose that the committee go into private session to consider other business.
