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PPC 3 and 4 – Costings with Responses Budget 2021

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PPC 3 and 4 – Costings with Responses Budget 2021 PPC 3 and 4 – Costings with Responses Budget 2021 1. Indexation of Welfare Payments 1. Detailed description of item or policy on which a costing is required: To provide in tabular form, listed by payment type, the cost of increasing all social welfare payments under the following scenarios: Scenario 1 – a €5 increase on each weekly and monthly payment Scenario 2 – a €10 increase on each weekly and monthly payment Scenario 3 – indexation of all payments in line with increases to HICP Scenario 4 – indexation of all payments in line with assumed wage growth (compensation per employee) in 2021. 2. What assumptions/parameters do you wish the Department to make/specify? To use existing assumptions regarding the cohort who will continue to receive each category of payment during 2021. To include all benefits and allowances. To also provide the cost of such increases if introduced from the week beginning 4th January 2021 and 1st March 2021. Reply See Appendix 5 The costings requested above are outlined in the spreadsheet supplied. Please note that costings are on the basis of the estimated number of recipients in 2020, for all schemes except Jobseeker’s Allowance and Jobseeker’s Benefit, which are based on the estimated number of recipients in 2021. The department is finalising the Outturn for 2020 and ELS including recipient numbers for 2021, and as such these costings are subject to change 2. Increased participation fees for activation schemes 1. Detailed description of item or policy on which a costing is required: To provide in tabular form, listed by scheme, the cost of increasing participation fees for all activation schemes under the following scenarios: Scenario 1 – a €2.50 increase on each weekly payment Scenario 2 – a €5.00 increase on each weekly payment Scenario 3 – indexation of all payments in line with increases to HICP Scenario 4 – indexation of all payments in line with assumed wage growth (compensation per employee) in 2021. 2. What assumptions/parameters do you wish the Department to make/specify? To use existing assumptions regarding the cohort who will continue to receive each category of payment during 2021. To also provide the cost of such increases if introduced from the week beginning Monday 4th March. Reply The costings requested above are outlined in the spreadsheet supplied. Please note that costings are on the basis of the estimated number of recipients in 2020, for all schemes except Jobseeker’s Allowance and Jobseeker’s Benefit, which are based on the estimated number of recipients in 2021. The department is finalising the Outturn for 2020 and ELS including recipient numbers for 2021, and as such these costings are subject to change. 3. State Pension Age 1. Detailed description of item or policy on which a costing is required: A) The cost to the Department in 2021 of not increasing the eligibility age for the State pension to 67, retaining 66. B) The cost of introducing a State transition pension in 2021 for those who are forced to retire at 65, but are not eligible to receive the State pension until they turn 66. 2. What assumptions/parameters do you wish the Department to make/specify? For (A) based on expected claim numbers, and for (B) based on number of those aged 65 signing on for benefits or credits. Reply A) State Pension Age Based on recent modelling , the Department’s best current estimate for the additional net costs per annum of not increasing State Pension Age to 67 years in 2021 range from in excess of €200m in 2021 (due to a first year effect) to an average of over €400 million per annum thereafter, with this increasing every year. These estimates are net costs and take into consideration additional increases or reductions arising in PRSI receipts, movements from other social welfare schemes, and secondary benefit entitlements including Free Travel, Fuel Allowance, Household Benefit Payment and Telephone Allowance. The estimates are based on current rates of payments and do not make any provision for rate increases. The cost of these estimates would be expected to double from 2028, should the State Pension Age not increase to 68, as is currently legislated for. B) State Transition Pension The Department’s best current estimate for the gross cost of reintroducing State Pension (Transition), on the same basis as it previously operated, is €293 million for a full year. It is expected that these costs would be offset somewhat by savings of €166 million on Working Age Schemes, arising from recipients transferring from these schemes to State Pension (Transition), giving a net cost of €127 million each year. These figures are based on current payment rates. This costing was calculated based on analysis of the observed ratio of SPT awards to State Pension (Contributory) awards for the period from 2009 to 2012, and projecting this forward in terms of estimated recipient numbers in coming years. The estimates are based on current rates of payments and do not make any provision for rate increases. It should be noted that the above costings are subject to change in the context of emerging trends and associated revisions of the estimated numbers of recipients 4. Contributory Welfare 1. Detailed description of item or policy on which a costing is required: The detailed costs of introducing an income linked job seekers payment amounting to up to €30 a week extra above existing benefit levels, as a first step towards creating a system of contributory welfare that recognises that those who contribute to our social insurance fund should benefit when they need it most. 2. What assumptions/parameters do you wish the Department to make/specify? To assume the introduction of the scheme with effect from January 2021, noting any technical issues that may prevent such early introduction. To provide for a maximum additional payment of €30 per week in cases where a person has been in continuous, full- time employment, earning over €30,000 per year. Reply The total estimated cost of increasing Jobseeker’s Benefit for those with previous earnings above €30,000 per year is €17.2 million, based on the estimated number of Jobseeker’s Benefit recipients in 2020. Issues: IT development may cause implementation delays Delay in receipt of data from Revenue Inflows and outflows to/from Jobseeker’s Benefit The earnings data from Revenue arrives as an annual figure for each customer. It is not possible to ascertain if the earnings were from continuous full-time employment Facts: Calculation is made on 2019 figures as this is last full year that data is available The number of Casual Jobseeker’s Benefit recipients are not included so if they are included then the costing would increase On average 28% of JB recipients had earnings of €30,000 or over every year since 2016. The costing below may increase as earnings data is missing for almost 2,000 cases. If we apply the 28% to that figure then the costing could increase by €873,600 (520 x €30 x 52) Workings: 2019 - Average weekly number of JB recipients 32,750 2019 - On average 29% of JB recipients had earnings of €30,000 or over in the GCY 29% of 32750 = 9,497.5 9,497.5 x €30 x 52 = €14,816,100 rounded to €14.8 million If costing is applied to provisional number of JB recipients for 2020 as 2021 is not yet available 2020 – Provisional number of JB recipients is 38,120 2019- On average 29% of JB recipients had earnings of €30,000 or over in GCY 29% of 38,120=11,054.8 11,054.8 x €30 x 52 = €17,245,488 rounded to €17.24 million 5. Child Benefit 1. Detailed description of item or policy on which a costing is required: A) The cost of increasing Child benefit payment by €5 per month, and €10 per month respectively. B) The cost of expanding Child Benefit to parents with children who have passed their 18th birthdays but remain in second-level education. 2. What assumptions/parameters do you wish the Department to make/specify? For B, current school participation rates should be assumed as constant for the purpose of this costing. Reply (A) The estimated cost of a €5 increase per month is €74m and a €10 increase is estimated to cost €148m in a full year. (B) Child benefit is a monthly payment made to families with children in respect of all qualified children up to the age of 16 years. The payment continues to be paid in respect of children until their 18th birthday when they are in full-time education, or if they have a disability. It is estimated that the cost to extend the child benefit payment to 18 year olds in secondary level education is an additional €58.3m per year. 6. Increase for Qualified Child Payment 1. Detailed description of item or policy on which a costing is required: The cost of a €1, €3, €5 and €10 increase respectively in the Qualified Child Increase payment for A) under 12’s from the current €36 B) children aged 12 and over from €40; and outline any knock-on effects on other payment schemes. To also provide the cost for similar increases to the Back to Work Family Dividend. 2. What assumptions/parameters do you wish the Department to make/specify? Using the same parameters as currently apply. Provide the response in tabular format please. Reply See Appendix 5 The costings requested above are outlined in Appendix 5. Please note that costings are on the basis of the estimated number of recipients in 2020, for all schemes except Jobseeker’s Allowance and Jobseeker’s Benefit, which are based on the estimated number of recipients in 2021.
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