Dáil Éireann - Volume 481 - 15 October, 1997

Other Questions. - Family Income Supplement.

6. Mr. J. O'Keeffe asked the Minister for Social, Community and Family Affairs his views on whether family income supplement should be payable on net income and apply also to the self-employed. [16562/97]

Mr. D. Ahern: The family income supplement scheme is designed to provide an incentive for [939] low-paid workers with families to take up or remain in full-time employment. It is crucial that there should be a reward for working and that barriers to the transition from unemployment to employment should be removed from the social welfare system. In this context, I fully support the commitment made in the Partnership 2000 Agreement that FIS should be reformed to be calculated on a net income basis, rather than on gross wages as at present. This reform will significantly increase the supplements payable under the scheme and thus act to increase the rewards from work. As an initial step in this process, provision was made this year for FIS to be calculated on the basis of gross earnings less any PRSI contributions, levies and pension contributions paid. An increase of £10 at each point in the income thresholds governing entitlement to FIS was introduced this year, ensuring that virtually all current FIS recipients are better off by at least £6 a week.

Self-employed people whose income falls below the rate of unemployment assistance appropriate to their family circumstances are entitled to claim unemployment assistance. The rate of unemployment assistance payable depends on the person's means. In assessing means, account is taken of the net income which the applicant may reasonably expect to receive in the next year.

It has been estimated that the extension of FIS to self-employed people with children would cost in the region of £30 million in a full year. This cost would be in addition to the existing expenditure involved in providing unemployment assistance to self-employed people whose income falls below the rate of unemployment assistance appropriate to their family circumstances. In view of the very significant additional costs involved, the question of extending FIS to self-employed people would be a matter for consideration in a budgetary context.

Mr. J. O'Keeffe: Does the Minister accept that my two proposals on payment on net income and payment to the self-employed were approved at all-party level by the All-party Committee on the Family chaired by Deputy McGrath? Would he also accept that the family income supplement is a vehicle which has cross-party support and should be developed? The uptake on it is quite low, and we should make every effort to improve it to encourage more people to be employed.

Mr. D. Ahern: It is a very important scheme. All parties when in Government have supported and extended it as much as possible. Paragraph 4.19 of the Partnership 2000 agreement recommends that family income supplement should be calculated on the basis of net income rather than gross as it is at present. Small changes were made last year. The total expenditure of FIS for 1997 is estimated to be £28.8 million. There are approximately 12,300 families in receipt of FIS at an average [940] weekly payment of £39.53. Family income supplement is currently calculated on gross income and so fails to take account of the effect of taxation on that income. This gives rise to a situation where a FIS recipient's disposable income may be reduced as a result of entering the tax net. That is why it has been recommended by all parties that it be calculated on net income. I accept what the Deputy said about Deputy McGrath's committee. In my first days in office Deputy McGrath kindly gave me a copy of the report of that committee which dealt with issues like this. I thank him for that.

Proinsias De Rossa: Would the Minister accept that, while in principle we would all support the idea of the assessment of FIS on the basis of net income, to implement that immediately would be extremely costly and the benefit would go to those on the higher end of the low income scale because of the manner in which tax impacts on income, particularly for single people with one child or families with a smaller number of children?

Mr. D. Ahern: In the overall context of budgets, it will be extremely costly to extend the family income supplement. The cost of assessing eligibility on net income will be about £30 million. However, it is a commitment in the Partnership 2000 agreement that the Government is bound to honour. The family income supplement is a scheme to help people on low pay. The more one tinkers with the threshold levels the greater possibility of coming up with a result that was not intended. This has been looked at keenly by the Department and by the social partners who are fully behind the suggestion that eligibility should be based on net income. I intend to honour the Partnership 2000 agreement.

Proinsias De Rossa: I am not suggesting the Government should not comply with that commitment, but that it reduce the cost substantially if a minimum wage were in place. Will the Minister ensure that while FIS is being converted to being assessed on the basis of net pay a minimum wage is put in place also?

Mr. D. Ahern: The issue of minimum wage is not directly my responsibility. However, it is one of quite a number of issues being looked at by the Government. I have a direct responsibility for the family income supplement and a commitment which I intend to meet.

Mr. McGrath: Based on the figures the Minister gave, it would cost £30 million to implement this scheme for the self-employed. Does that not indicate that the self-employed do not get wages that are high enough to keep their families and that they need this supplement to give them a living wage? Is it not also the case that by not paying family income supplement to the self-employed the Department is, in effect, not accepting for [941] family income supplement purposes figures that the Revenue Commissioners accept for tax purposes? Does this not constitute a major policy difficulty? The self-employed, even if they are on low income cannot qualify for the family income supplement. The Minister mentioned that they could get unemployment assistance, but there is a difference of about £60 a week between the threshold for FIS and the threshold for unemployment assistance, which is a colossal difference. This is a colossal sum. The matter should be looked at urgently.

Mr. D. Ahern: In giving the figure of £30 million I was not referring to the self-employed but to the change in the method of calculation from gross to net income. As it happens, if the family income supplement scheme was extended to the self-employed the cost would also work out at £30 million.

Mr. McGrath: Another £30 million.

Mr. J. O'Keeffe: For each?

Mr. D. Ahern: Yes. This would require a policy decision which would have to be made in the light of budgetary considerations. Previous Governments in their wisdom decided not to do this. They probably believed it was better to use the limited resources available elsewhere.

Mr. McGrath: Perhaps the Minister will break new ground.

Mr. Naughten: The biggest complaint people from disadvantaged areas have, voiced at a youth conference that I attended last weekend, is that they are unaware of their entitlements under social welfare schemes. What is the uptake under the family income supplement scheme and what steps is the Minister taking to ensure all families entitled to receive the supplement are aware of it? The onus should be on employers and the officials in the Department to ensure people are aware of their entitlements.

Mr. D. Ahern: There are 12,300 families benefiting under the family income supplement scheme. The Department is one of the most successful in disseminating information. It issues pamphlets and bulletins through its network of local offices and provides assistance to voluntary groups and the NSSB which comes under its aegis. It makes considerable efforts to disseminate information not just on the family income supplement scheme but all other schemes.

Mr. Naughten: What percentage of the total number entitled to receive the family income supplement have taken it up?

Mr. D. Ahern: I do not have that figure but I will communicate with the Deputy.

[942] Mr. J. O'Keeffe: I am told it is about one in three.