BUDGET CUTS:SOCIAL WELFARE payments should be cut to avoid existing poverty traps and "improve the benefit for working", according to the Department of Finance.
A document published on the department’s website yesterday makes the case for lower rates of welfare payments ahead of next week’s budget.
It indicates that the means test for jobseeker’s allowance will be tightened and that the Government may seek to move people off the rent supplement payment into social housing to eliminate “significant disincentives to work”.
The Department of Finance also identifies a “strong incentive” for single parents to favour community employment schemes over other low-paid employment and says this should be examined.
A poverty trap exists for single parents who move from earning the national minimum wage to higher rates of pay, it adds.
The document, Replacement Rates and Unemployment, says "the net benefit from working may be limited" for some welfare recipients, in particular couples with children and people who receive rent supplement.
A two-earner couple where one spouse earns the national minimum wage would receive 76 per cent of their earnings were one spouse to give up paid work and claim entitlement to jobseeker’s allowance (JA).
“The means test for JA where one spouse is working and one person is claiming means-tested JA should be re-examined,” it states.
It also concludes that back-to-work or “labour activation” measures should be expanded and that the rent supplement paid to people out of work should be used as “an emergency housing payment”. Many recipients of this payment should be moved either into social housing or the rental accommodation scheme.
Bob Jordan, director of housing group Threshold, said it was imperative that social housing be made available before any changes to rent supplement were made.
“You cannot take people off rent supplement or reduce their entitlement without providing the housing first,” Mr Jordan said.
The payment had already been cut twice in the past 14 months, he said, while only 23,469 places in the rental accommodation scheme had been made available since the scheme started four years ago.
Meanwhile, Karen Kiernan, director of the lone-parent support group One Family, said the reasons the community employment scheme was popular with lone parents were more complex.
“In the good times, one-parent families didn’t go into the community employment schemes for the amount of money they were earning, they went in because it was otherwise very difficult for them to receive part-time, flexible education, training and work.”
The Department of Finance said its research reflected some of the conclusions in the McCarthy report: “The policy implications . . . will be considered by the Government in formulating the budget,” it said in a statement.
Its new report considers the “replacement rates”, or the percentage of a person’s take-home pay that they would receive in social welfare benefits if they are made unemployed.
A replacement rate of more than 70 per cent was considered “excessive”, it said.
In one case, it found that an out-of-work couple receiving a Dublin rent supplement and other benefits had income that was 102 per cent that which they would earn if they were working at the national minimum wage.
