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Tuesday 5 December 2023 Dublin: 3°C
Laura Hutton/Photocall Ireland Brendan Howlin walking to the Dáil on Monday afternoon to deliver the first part of the Budget

Column We had to make difficult cuts in the Budget - but these are extraordinary times

Social welfare spending has to be cut in order to balance the budget – but we can still protect the most vulnerable, says Joan Burton, Minister for Social Protection.

THIS GOVERNMENT HAS faced very tough decisions in agreeing the measures contained in this Budget.

At the moment, the state is spending €16 billion more each year than it receives in taxes and PRSI. The Department of Social Protection will spend €21 billion, or almost 40 per cent of all current government expenditure, this year.

To be precise:  four in every ten euros that the government spends are spent on social protection. It is vital that this Government secures economic recovery. To do this we must put the public finances back on a sustainable footing.

We have decided to make an adjustment of €3.8 billion between tax and spending in 2012. Of this, €1.45 billion is to come from day to day spending including health, welfare and education.

As the biggest spending Department, the Department of Social Protection must play its part in that adjustment.

Yes, there will be €475 million in cuts in my department. But it could have been €665 million.

Previously, it was proposed to reduce the Department of Social Protection’s spending by €665 million in 2012. However, this government was unwilling to impose such a devastating level of cutbacks at a time of such severe economic difficulty.

We have decided to limit the adjustment in Social Protection spending to €475 million or just over two per cent of the Department’s spend. Our decision to limit the spending reduction in Social Protection also recognises the stimulus effect that welfare spending has on the economy.

I recognise the severe impact on families, individuals and communities as a result of the economic collapse. I want to protect them from the worst consequences of this very deep recession by delivering on the promise not to cut primary social welfare payments.

The  personal rates of all weekly payments such as Jobseeker’s Benefit and Allowance, Illness Benefit, Invalidity Pension, Disability Allowance, Blind Pension, Carer’s Benefit, Carer’s Allowance, State Pensions, Widow(er)’s Pensions and One Parent Family Payment will not be reduced next year.

In addition, increases which are paid for spouses and partners as well as child dependants are fully protected. The Living Alone and Over 80 allowances are also unchanged.

‘Even after the loss of  sovereignty, our welfare rates remain generous by comparison with our nearest neighbours’

Supporting families and children represents a statement about our values – that this country is a good place to raise children. Even to take a hard-nosed economist’s look at it, it represents the means through which we guarantee our future prosperity and well-being.

What I and my colleagues have been wrestling with is not the principle of such supports, but with how we might put this principle into practice given the economic and fiscal realities that we face.

The Budgetary measures that directly affect child related payments are measured.  They continue to ensure that payments genuinely address the needs of families.

The standard rate of child benefit will remain unchanged at €140. There will be no reduction in Child Benefit for the first and second child.

Even after the loss of our economic sovereignty, our core welfare rates remain generous by comparison with our nearest neighbours.

For example, rates of Child Benefit in Northern Ireland are €102.50 per month for the first child and then €67.70 per month for each additional child.

The adult rate of Jobseekers Allowance and Benefit in Northern Ireland is €78.33 for an individual and €122.95 for a couple. The rate here will continue to be €188 for an individual and €312.80 for a couple.

‘Citizens should receive benefits in proportion to their contributions’

Since being appointed as Minister for Social Protection in March this year, I have looked with fresh eyes at the existing social protection system.  One of my key priorities has been to balance the books.

A core principle  is that citizens receive benefits in proportion to their contributions.

Some of the changes that I am announcing today in the area of pensions put this principle in to practice. For example, recipients of the State Pension who have contributed more will receive a more generous pension.

I expect my colleague Michael Noonan, Minister for Finance, will have something to say tomorrow about widening the PRSI base in order to help plug the hole in the Social Insurance Fund.

‘Everyone should be entitled to one weekly income support payment’

Another principle is that we should gradually move towards a system where everyone should have an entitlement to one weekly income support payment only — with no special arrangements or top-ups for particular groups.

It is no longer possible to have a social welfare system where some people get more than one primary weekly payment, if we want to avoid reducing the level of weekly payments generally.

We have delivered on our promise to retain core rates, but we are discontinuing entitlements to certain concurrent payments.

The five measures which will provide over half of the savings for my Department

Just over half the savings I am announcing today come from five main measures:

1. I am reducing the rebate for companies who make staff redundant from 60 per cent to 15 per cent of the statutory redundancy payment. Given the low level of employer PRSI payable in Ireland, I do not see why we should dip in to a fund that is already in deficit to compensate often profitable companies for the cost of making their employees redundant in Ireland and, in some cases, transferring their employment abroad.

2. The winter fuel allowance will in future be payable for 26 weeks, a reduction of six weeks. The size of the allowance and the duration of the allowance have greatly increased during the last ten years. The scheme is unsustainable, given the increase in numbers and costs and the fiscal position of the State.

Of course, we are still paying the fuel allowance for the coldest six months of the year (mid-October to mid-April). It has always been the case and will continue to be the case that a person in difficulty with fuel or energy costs can go their Community Welfare Service. They are now in my Department and they are ready to assist people in difficulty.

3. I am reducing Child Benefit to €148 for the third child, while the rate for the fourth child is reduced to €160.

4. I am increasing the minimum contribution to rent or mortgage interest supplement by €6 a week for a single person and €12 a week for a couple. Curtailing access to the Mortgage Interest Supplement scheme is consistent with the Keane Report on Mortgage Arrears. I also intend to reduce rent limits to ensure that state support for rent supplement tenants does not give rise to inflated rental prices.

5. The amount of earnings disregarded for the purposes of the One Parent Family Payment means test will be reduced from €146.50 per week to €130 per week next year.  There is a view that the disregard may have had the effect of trapping lone parents in low paid part-time employment in order to keep their earnings below the disregard.

I am announcing a number of other changes to the One Parent Family Payment scheme. The scheme cost €1.1 billion in 2010, up from €751 million in 2005. Despite these significant levels of spending on one parent families, the results have been poor in terms of tackling poverty and social inclusion.

‘We have endeavoured to protect the most vulnerable’

The transition to a more balanced budget simply cannot be made without reductions in social welfare spending.  However, we have endeavoured to protect the most vulnerable by maintaining the primary weekly social welfare rates and the main child benefit rates.

Even after these aforementioned savings, this government will spend €20.5 billion on Social Protection in 2012 sending a very strong signal that we place a very great value on the role of welfare in protecting our citizens at this extraordinarily difficult time.

Joan Burton is Minister for Social Protection and TD for Dublin West. She was speaking after the announcement of the comprehensive expenditure report by Minister Brendan Howlin.

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