Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698137286933.pdf (Ireland)
Revised Estimate for Public Services 2020 [Vote 37]: Employment Affairs and Social Protection PBO Publication 32 of 2020 – Expenditure Analysis series Contents Key Points ................................................................................................................................................ 2 Introduction ............................................................................................................................................ 3 PBO interactive visualisations ............................................................................................................. 3 Vote 37 – Proposed Spending in 2020 .................................................................................................... 4 Overview ............................................................................................................................................. 4 Will there be a Further Revised Estimate or Supplementary Estimate for Vote 37 in 2020?
........ 6 The Revised Estimate for Vote 37 and Performance Budgeting ..................................................... 6 Pandemic Spending – the relationship between Vote 37 and other Votes........................................ 7 Department of Children and Youth Affairs ..................................................................................... 7 Department of Business, Enterprise and Innovation ...................................................................... 7 The Social Insurance Fund ...................................................................................................................... 8 Overview ............................................................................................................................................. 8 Introduction ........................................................................................................................................ 8 The Recent History of the SIF .............................................................................................................. 9 The Impact of the Pandemic on the SIF ............................................................................................ 10 The Future of the SIF ............................................................................................................................. 10 The Revised Estimates for Public Services 2020 – The remaining 43 Votes ......................................... 11 1 Key Points ▪ The Government is seeking the approval of Dáil Éireann for a net amount of €16,298,646,000 (approx.
€16.3 billion) for Employment Affairs and Social Protection, as set out in Part 1 of the Revised Estimate 2020 for Vote 37.

The income and spending of the Social Insurance Fund (SIF) is also presented with the Vote but this does not require Dáil approval.

▪ The total amount of spending set out for the Department of Employment Affairs and Social Protection in 2020 is now €28.04 billion.

This contrasts with an allocation of less than €21 billion in 2011, at the height of the last crisis.
▪ The Revised Estimates for 2020 were originally published in December 2019 but were not approved by the Dáil.

This means that spending on public services from Dáil-approved monies is currently limited to 80% of the amount set out in the Appropriation Act 2019 for Vote 37.

This limit is forecast to be breached during the first week in June, which is why the approval of the Dáil is being sought for this ‘new’ Revised Estimates for 2020.
▪ The Revised Estimate for which Dáil approval is now being sought shows an increase of €5.5 billion in Vote 37 spending, compared to what was originally proposed for 2020.

An increase in spending of €1.3 billion for the Social Insurance Fund (SIF) is also presented.
▪ Employment Affairs and Social Protection spending to address the COVID-19 pandemic has, in the period since late March, been concentrated in two fiscally significant schemes; the Temporary Wage Subsidy Scheme (TWSS) which is scheduled to expire on 18th June and the Pandemic Unemployment Payment (PUP) due to expire on 9th June.

No clarity has been provided on whether these schemes will be amended though the Taoiseach has suggested payments will be extended.
▪ The scale and rate at which non-essential businesses reopen in line with the Government’s Roadmap will determine the final cost of the TWSS and PUP schemes.

It will also determine the scale of increases in Jobseekers Allowance and Jobseekers Benefit to be paid in the second half (H2) of 2020.
A better than anticipated rate of re-employment could also be partially offset by an increased uptake of Illness Benefit for COVID-19 absences if some of the increasing labour force contract COVID-19 or are directed to self-isolate.

Either way, it is likely that there will be a need to revisit the allocation for this Vote again during 2020.

▪ Even without these income and employment supports, spending on other schemes would have increased in H1 2020.
Jobseeker’s Allowance and, primarily, Jobseeker’s Benefit would have been most affected.

These schemes have stricter eligibility criteria and, in general, lower rates of payment than the pandemic supports which have been introduced.

• Most of the overall extra spending by Government in response to the pandemic relates to Employment Affairs and Social Protection (Vote 37).
Dáil approval for new Estimates for other Votes such as Health (Vote 38) will be required in the next few months as they too begin to approach their sanctioned spending limit.

The original Revised Estimates for 2020 forecast spending of €70.4 billion - €62.2 billion in current spending and €8.2 billion in capital.

Based on announcements made to date, the PBO forecasts that Voted spending could now reach €78 billion – an increase of €7.6 billion.
There has been very little indication 2 that areas where public services have been curtailed because of the pandemic will provide off-setting savings, or that funds are being re-directed within Votes to address new priorities.

Introduction Revised Estimates for Public Services are usually referred to Dáil select committees for scrutiny.1 This is not currently possible.
The approval of Dáil Éireann for the allocation of additional money to this Vote is required now so that the Department of Employment Affairs and Social Protection can continue making all its planned payments in H2 2020.

However, the details of the additional spending proposed by Government were only provided on the day before approval was scheduled to be sought (i.e.

27th May).
27th May).

Given the scale of the additional spending and the vital role of parliamentary scrutiny of budgetary issues, this late provision of data to the Dáil is far from ideal.

Non-timely provision of information before securing approval for spending public monies is an ongoing occurrence across many Government Departments.

This was illustrated in this PBO infographic which highlights the issue in advance of the scrutiny by committees of the Supplementary Estimates last year.
In this case, the limited time to analyse the information is exacerbated by the amount of extra spending needed.

This PBO Note distinguishes between spending from Vote 37, and from the Social Insurance Fund (SIF).

It takes this approach because the Dáil will be asked to approve Voted spending on 28th May, not spending from the SIF.

There is however a close relationship between the Vote and the SIF2 which is why the latter is also presented in conjunction with the Vote in the Revised Estimates.
PBO interactive visualisations Please note that the PBO has published a series of interactive visualisations on its webpage which help to illustrate the Revised Estimate for Vote 37.

1 The normal scrutiny process for Votes is set out in PBO Publications 10 of 2020 and 8 of 2020.

2 See PBO Note 21 of 2018, The Social Insurance Fund and Vote 37 in the Revised Estimates for Public Services.
3 Vote 37 – Proposed Spending in 2020 Overview This section briefly addresses the impact of the COVID-19 pandemic on the allocation sought by the Department of Employment Affairs and Social Protection for 2020.

The scale of the allocation being sought is stark.

In 2011, at the height of the fiscal crisis, the Employment Affairs and Social Protection (including the SIF) allocation was less than €21 billion – see Table 1.
On 28th May, the Dáil will be presented with spending of just over €28 billion, and this does not include further potential spending on the Christmas Bonus or an extension to the PUP or the TWSS.
Table 1 – Vote 37 and SIF, 2011 v. 2020 2011 - € millions Administration Pensions Working Age - Income Supports Working Age - Employment Supports 861,454 Illness, Disability And Carers Children Supplementary Payments 582,352 6,114,291 6,198,439 3,443,120 2,429,216 1,328,880 20,957,752 2020 - € millions 658,968 8,425,470 7,755,150* 2,748,328** 4,752,750 2,783,170 916,934 28,040,770 Sources: PBO, based Revised Estimates for Public Services 2012 and 2020.

Notes: *Includes PUP, **Includes TWSS.


Taking a more immediate view of the impact of the pandemic on Vote 37, Figure 1: Vote 37 Allocations 2019 and Revised Estimate Allocation for 2020 by date: December 2019 and May 2020* shows: ▪ The 2019 voted allocation ; ▪ The allocation set out in the Revised Estimates for Public Services 2020 (December 2019); and ▪ The allocation sought in May 2020 to reflect increased spending linked to the pandemic.
4 Figure 1: Vote 37 Allocations 2019 and Revised Estimate Allocation for 2020 by date: December 2019 and May 2020* s n o i l l i B €18 €16 €14 €12 €10 €8 €6 €4 €2 €0 2019 Allocation Rev 2020 (December 2019) Rev 2020 (May 2020) Administration Pensions Illness, Disability and Carers Supplementary Payments, etc.

Working Age -Employment Supports Children Working Age - Income Supports *Hatched series show where there is no increase in the allocation sought (for 2020) in May 2020 compared to December 2019 i.e.
these categories of payments are to date unaffected by the pandemic.

Source: PBO based on the Revised Estimates for Public Services 2020 (2019) and Gov.ie, ‘Government announces new COVID-19 Income Support Scheme’ (2020).

Figure 1: Vote 37 Allocations 2019 and Revised Estimate Allocation for 2020 by date: December 2019 and May 2020* illustrates that an increase of just 1% in gross expenditure for Vote 37 was originally projected for 2020.
A significant rise in Illness, Disability and Carers payments was the main driver for this proposed increase with offsetting reductions across other areas.

The original estimate for Income Supports and Employment Supports spend was €3.07 billion for 2020 (-1.9% on 2019).

Together, these two categories of supports represent almost 28% of the total allocation sought for 2020, in December 2019.
The increased allocations now being sought for Income Supports, and Employment Supports are the main drivers for the total growth in the Vote’s projected spending.

Together these payments amount to almost €8.37 billion.

This means that the pandemic has driven a projected increase of approximately €5.3 billion.

The increase to Income Supports and Employment Supports make up 96.5% of the increase in the gross allocation sought.
Overall, the total €5.485 billion would increase spending under Vote 37 to almost €16.52 billion (nearly 50% above the entire Vote allocation sought in REV 2020 (December 2019)).

Table 2 (over) sets out all the increases in Voted spending sought by subhead.
5 Table 2 – Subheads where spending increases are sought for 2020 (December 2019 v. May 2020) Subhead A.4 - Jobseeker's Allowance A.xx - Pandemic Unemployment Payment A.12 - Community Employment Programme A.14 - Tús A.yy - COVID-19 Temporary Wage Subsidy Scheme A.33 - Back To School - Clothing And Footwear Allowance A.36 - Rent Supplement A.40 - Fuel Allowance Total Vote increase Increase (€) 975,300 2,230,000 9,500 6,000 2,073,900 98,900 70,000 21,400 5,485,000 Source: PBO, based on the Revised Estimates for Public Services 2020 (2019) and the Revised Estimate for Vote 37 (May 2020).
The Revised Estimate contains two new subheads for the payment of the TWSS and the PUP (A.xx and A.yy, as set out in Table 2).

Six other subheads propose increased spending, while no subheads show reduced spending.

Will there be a Further Revised Estimate or Supplementary Estimate for Vote 37 in 2020?

There is considerable uncertainty as to the status of the TWSS and the PUP and under what conditions will they be extended.
To some degree this is inevitable in the context of a combined and intertwined global recession and public health crisis.

The figures presented in the Revised Estimate for these payments are the projections up to their current cut-off date.

Additional sums will be needed if they are extended.

This means that there is little clarity as to whether the Revised Estimate now presented to the Dáil is an accurate representation of the total resources that will be required in 2020.
This should be clarified as a matter of urgency.

In addition, the Christmas Bonus for eligible social welfare and insurance payments is not included in the proposed allocation for Employment Affairs and Social Protection.

While it is at the Government’s discretion to make such a payment, it would be unusual if some payment was not made.

This Estimate for both this Vote and the SIF are not a reliable guide for whole of year spend.
It is acknowledged that the Christmas Bonus is a discretionary decision for Government at a later stage of the year, but transparency would be enhanced by including a table (for information only) setting out an estimate for the payment of the Christmas Bonus based on the estimated number of eligible recipients.
Taken together and given the uncertainty with regards to the number of payment recipients, it is likely that a Further Revised Estimate or Supplementary Estimate for this Vote will be needed before year end.
The Revised Estimate for Vote 37 and Performance Budgeting While the PBO acknowledges the difficult circumstances prevailing, it is nonetheless disappointing that “Performance Budgeting targets have not been revised to take account of the impact of COVID 19 related outputs”.3 The development of Performance Budgeting, for all Votes, is essential if parliamentary scrutiny of Government spending is to reach its full potential.

This assists Members 3 Vote 37 (Revised Estimate 2020, May 2020).
6 to understand what is being delivered with public resources and ensures that resource allocation decisions are better informed.

It is also disappointing that ‘context and impact’ indicators relating to consistent poverty rates for specific groups (rather than the total population, as at present) have not been provided.

The current situation where only the consistent poverty rate for the total population is provided reduces the visibility of how specific groups are being targeted by DEASP expenditure.
If this issue were addressed in the Revised Estimates, it would assist Dáil Éireann and its committees when scrutinising EASP spending and performance.4 Pandemic Spending – the relationship between Vote 37 and other Votes Vote 37’s role in supporting employees and businesses during the shutdown is noteworthy.
This role results in Vote 37 having a direct influence on how two other Departments address the pandemic and the amounts that they spend: • Department of Children and Youth Affairs; and • Department of Business, Enterprise and Innovation.
Department of Children and Youth Affairs Following the closures of all schools, places of learning, and childcare providers on 12 March, as part of the State’s response to COVID-19 virus, the Department of Children and Youth Affairs (DCYA) developed a financial support scheme for childcare providers in order to protect staff income and to ensure the continued viability of the sector.
On 26 March, the Department proposed the Temporary Wage Childcare Subsidy Scheme (TWSCS) which would interact with/top-up the Temporary Wage Subsidy Scheme (TWSS) being funded from Vote 37.

DCYA has committed to ensuring workers in the sector receive 100% of their pre-pandemic net weekly income (up to a maximum of €586 net per week) or a minimum combined TWSS and TWSCS payment of €350 per week, if the employee’s income was below €350 net per week before March 12.
With more than 30,000 staff across 4,598 providers eligible for support via the Temporary Wage Subsidy Childcare Scheme, the PBO has estimated that the cost to Vote 40 (DCYA) for an 11-week duration (to 18 June) will be approx.

€41 million (rising to approx.

€65 million when a business overhead payment is combined).

However, with the majority of funding for payments to childcare staff coming from the TWSS, up to €85 million will be needed from Vote 37’s allocation to fund the sector.
While the DCYA scheme is due to cease on 18 June, in line with the TWSS, it is likely this end-date will need to be extended, given the continued closure of childcare providers.

For a more detailed analysis of these supports, please see PBO Publication 28 of 2020: The Covid-19 Pandemic – State Spending in the Childcare Sector.

Department of Business, Enterprise and Innovation The COVID-19 pandemic has resulted in widespread closures of businesses.
As per the publication of a Roadmap for Reopening Society & Business (1 May 2020), a return to activity will be on a phased basis.

4 See PBO Publication 40 of 2019, Employment Affairs & Social Protection Expenditure: Performance Budgeting and the Consistent Poverty Rate.

7 In the interim, supports for enterprise are needed to ensure that as many businesses as possible remain viable.
These supports are varied but primarily fall within the remit of the Department of Business, Enterprise and Innovation (DBEI - funded through Vote 32).

A forthcoming PBO Publication will clarify and analyse these supports and their potential cost to the Exchequer.

The Temporary Wage Subsidy Scheme has therefore served as an additional support to businesses that may go on to avail of the DBEI’s schemes.

The Social Insurance Fund Overview The SIF provides a limited counter-cyclical buffer.
It has experienced a robust recovery since the economic crisis and had a provisional reserve of €3.89 billion at end-2019.

However, the effects of the pandemic will significantly reduce the SIF’s income in 2020 and is projected to necessitate considerable increases in SIF spending – in particular, Jobseekers Benefit will increase from €348 million in 2019 to over €1.5 billion in 2020.

As a result, there is considerable risk that the SIF’s reserves will be significantly reduced in 2020.
Previous experience of how quickly recessions impact the SIF suggests that this emphasises the urgency of reforms affecting the SIF.

Introduction The Social Insurance Fund (SIF) was previously discussed by the PBO in An overview of the Social Insurance Fund (SIF) (2018).

In that Note the PBO highlighted that where SIF income exceeds its liabilities it places the balance in either a current account or an investment account.
Specifically:5 Moneys not required to meet SIF current expenditure requirements are transferred from the current account to the investment account.

The investment account is managed and controlled by the Minister for Finance who has delegated investment responsibilities to the NTMA under Section 28 of the NTMA Act 2000.

The SIF has had an annual surplus since 2016 and in the interim has invested some of surplus into the investment account.
In 2018, the last year for which final data is available, the investment account grew from €500 million in 2017 to €2,065 million.6 As outlined in The COVID-19 Pandemic: Implications for the Social Insurance Fund (2020) the Department of Employment Affairs and Social Protection has outlined provisional SIF reserves of €3.89 billion at end-2019.
Assuming that the structure of the fund’s accounts remained similar to 2018 then the majority of that €3.89 billion reserve would be placed in the investment account.

5 Department of Employment Affairs and Social Protection, Social Insurance Fund: Financial Statements 2018 (2019) p.18.

6 Ibid.
8 The Recent History of the SIF Figure 2 illustrates the provisional outturn of the SIF for the years 2003-2020 as per the Revised Estimates for Public Services.7 Figure 3 tracks the SIF’s reserves and the Exchequer subventions required over the period 2003-2018.8 Figure 2: Annual Provisional Outturn of the SIF (2003-2020) s n o i l l i M €2,000 €1,500 €1,000 €500 €0 -€500 -€1,000 -€1,500 -€2,000 -€2,500 -€3,000 Surplus Deficit * In 2016 and 2017 nominal subventions of €1,000 were made to the SIF for technical reasons.
These are not included in the figures, and in any case, are immaterial in the scale of the SIF.

Figure 3: SIF Reserves 2003-2018 s n o i l l i M €4,500 €3,500 €2,500 €1,500 €500 -€500 -€1,500 -€2,500 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: PBO (2020) – see footnote 8 above.

SIF Reserves/Surplus Subvention Figure 2 illustrates that the SIF suffered large shortfalls in the period 2008-2015.
At first, the SIF disposed of reserves where in-year income was insufficient to meet its liabilities.

In 2008 and 2009 the SIF’s reserves were eroded and in 2010 the remaining reserves were insufficient to meet the SIF’s 7 The PBO sourced these at Gov.ie, ‘The Revised Estimates Volumes for the Public Service’; and at the Oireachtas Library Catalogue.
8 This was derived from the Revised Estimates for Public Services 2004-2010; Department of Employment Affairs and Social Protection, Social Insurance Fund: Financial Statements 2018 (2019); Department of Employment Affairs and Social Protection, Accounts of the Social Insurance Fund (2017) p.18; and Department of Employment Affairs and Social Protection, 2020 Revised Estimates: Vote 37 & Social Insurance Fund (May 2020) p.72.

9 liabilities – requiring an Exchequer subvention.


Having disposed of its remaining reserves in 2010, the shortfalls for the period 2011 to 2015 were met entirely through subventions.

Cumulatively these subventions were almost €7.4 billion.

It is now clear that the SIF will run a deficit in 2020, with spending exceeding its income – this will require the SIF to dispose of some of its assets (i.e.

its accumulated surpluses).


Figure 3 complements Figure 2 by illustrating the sudden collapse of SIF reserves – particularly in 2009.

In the pre-crisis period, the SIF’s reserves reached a maximum of c.€3.63 billion in 2007.

By 2010 not only had the SIF’s reserves been exhausted but an additional €230.9 million was required by way of subvention to allow the SIF to meet its liabilities.
The Impact of the Pandemic on the SIF As previously stated, at end-2019 the provisional reserves of the SIF were €3.89 billion.

This represents a robust recovery since 2016 to a level similar to its pre-recession peak.

However, it is important to recall the earlier observations of the PBO:9 In any case, the SIF will see significant reductions in income compared to the 2020 forecast.
Should pandemic specific employment and unemployment schemes be discontinued, the impact on SIF spending could be significant.

In 2020, the SIF’s spending is projected to exceed its income by c.€1.95 billion (see Figure 2).

This is due to a significant reduction in SIF income in 2020 from Pay Related Social Insurance Receipts (PRSI) along with increased expenditure on a range of schemes funded by the SIF.
Assuming this arises, then it can be expected that the SIF’s reserves will be reduced by the same amount to meet this liability.

As such, the current projections indicate that the SIF’s reserves at end 2020 will be approximately €2 billion – in fact, they will be almost exactly halved.10 It would appear that the SIF provides some degree of counter-cyclical stability (i.e.

it accumulates reserves in good economic periods which can be expended in poorer economic circumstances).
However, as evidenced in the period 2008-2010, the SIF provides only a limited buffer against major increases in SIF spending and/or decreases in its income.

The Future of the SIF The SIF operates under a Pay as You Go (PAYG) model.

This means that the contributions from those employed pay for the benefits accruing primarily to pensioners.
In effect, the SIF should grow its reserves the greater the number of workers per pensioner (Old Age Dependency Rate (OADR)).11 The fewer workers per pensioner, the greater the risk that the SIF’s liabilities will exceed its income.

As such, it can be expected that the growth of the SIF’s reserves is in line with: ▪ The age profile of the state; and ▪ General economic performance.
This means that the SIF’s reserves are more likely to grow when the population is young and economically productive and will shrink as the population ages and/or becomes less productive.

In this sense the SIF operate cyclically; however, the use of its accumulated reserves to soften the impact 9 PBO, The COVID-19 Pandemic: Implications for the Social Insurance Fund (2020) p.3.
10 Per the Department of Finance, and Department of Public Expenditure and Reform, Fiscal Monitor: April 2020 (05 May 2020) PRSI receipts in April 2020 were actually €343 million above April 2019; however, it is clear that the impact of large-scale furloughing and laying-off of employees has yet to be become evident.

11 For a more detailed discussion of demographics, see PBO Demographics and Voted Expenditure (2019).

10 of negative changes i.e.


ageing population and/or reductions in productivity, means that it represents a counter-cyclical fiscal tool.

As noted by the PBO in An overview of the Social Insurance Fund (SIF) (2018), long-run projections suggest that the SIF will run a prolonged deficit – at least in part influenced by Ireland’s ageing population.

As already noted, the ability of the SIF to act as a counter cyclical buffer is limited.
The combination of the previous fiscal crisis and the COVID-19 pandemic will serve to significantly reduce the ability of the SIF to ameliorate the impact of Ireland’s ageing population on SIF spending.
Assuming the long-run projections are correct in predicting that the SIF will revert to an annual deficit, ultimately requiring subventions from the Exchequer, the cumulative impact of the fiscal crisis and now the pandemic crisis reduce the reserves of the SIF – therefore meaning subventions will be required sooner than had these crises not occurred.12 This places greater urgency on the Government to plan for the eventuality that the SIF will require subventions from the Exchequer in the medium to long-term (assuming a robust recovery from the pandemic).
In particular, reforms proposed in A Roadmap for Pensions Reform: 2018-2023 (2019), including those related to changes to the State Pension Age may prove necessary if the SIF’s reserves are to be grown post-pandemic.13 In the case that the economic recovery during/post-pandemic is not robust, the SIF may exhaust its reserves in the short-term and require subventions from the Vote thereafter.

At present this is assumed to be an unlikely outcome.
The Revised Estimates for Public Services 2020 – The remaining 43 Votes Outside of the direct financial pandemic-related interventions implemented across a number of Departments and Votes, some Departments may also see some schemes furloughed, projects suspended, and some costs deferred until 2021.

As there has been no public discussion or announcements of any such savings, the PBO cannot quantify whether they would make a significant contribution to the Exchequer.
However, given that public policy making requires that priorities be identified within limited resources it would seem likely that all Departments would identify their highest priorities.

They could then make savings so that the current public health crisis and support for employees and businesses can be given high priority and the commensurate resources.
The PBO assumes therefore that at least some other Votes that will be seeking approval later in 2020 would show reductions in their allocations compared with their initial 2020 amounts.

Disclaimer: This document has been prepared by the Parliamentary Budget Office (PBO) in accordance with its functions under the Houses of the Oireachtas Commission Act 2003 (as amended) for use by the Members of the Houses of the Oireachtas to aid them in their parliamentary duties.
It is not intended to be either comprehensive or definitive.

The PBO may remove, vary or amend any information contained therein at any time without prior notice.

The PBO accepts no responsibility for any references or links to, or the content of, any information maintained by third parties.

Staff of the PBO are available to discuss the contents of these papers with Members and their staff, but cannot enter into discussions with members of the general public or external organisations.
Contact: PBO@Oireachtas.ie Go to our webpage: www.Oireachtas.ie/PBO 12 KPMG, Actuarial Review of the Social Insurance Fund: 31 December 2015 (September 2017) p.170.

13 The Roadmap notes (p.6) that: Any pension system, be it public or private, must be able to absorb the impact of population ageing without becoming financially destabilised.

If the structural cost of the system becomes too high for current and future workers to sustain, it will not survive[.]

11