Dáil Éireann debate -
Thursday, 22 Feb 1990

Vol. 396 No. 2

Written Answers. - PRSI Exemption Cost.

Austin Currie

Question:

17 Mr. Currie asked the Minister for Social Welfare the cost of giving a general PRSI exemption on the first (a) £2,000 (b) £2,500 and (c) £3,000 of income; and the increase in income ceiling which would be required to fund the additional cost.

Michael D'Arcy

Question:

44 Mr. D'Arcy asked the Minister for Social Welfare the cost of giving a general PRSI exemption on the first (a) £2,000 (b) £2,500 and (c) £3,000 of income for all workers; the cost of the Government's £60 exemption; and the increase in the PRSI ceiling which would be necessary to fund (a) (b) and (c) over and above the cost of the Government's own proposal.

Dick Spring

Question:

54 Mr. Spring asked the Minister for Social Welfare the estimated cost in a full year to the Exchequer of introducing the PRSI exemption limit of the first £4,000 per annum of income; and if he will make a statement on the matter.

Minister for Social Welfare (Dr. Woods)

I propose to take Questions Nos. 17, 44 and 54 together.

The estimated full year cost to the Exchequer of giving a general exemption from social insurance to all employees in respect of the first (a) £2,000, (b) £2,500, (c) £3,000 and (d) £4,000 of income is as follows:

(a)	£2,000	£85 million
(b)	£2,500	£97 million
(c)	£3,000	£115 million
(d)	£4,000	£145 million

The estimated cost of giving a social insurance exemption to employees whose incomes are below £4,000 would be £23 million.

The above costs do not take account of savings which would arise if these arrangements were substituted for the exemption from PRSI of workers earning £60 per week or less, as announced in the budget. The estimated cost in a full year of that exemption is £11 million, the cost in 1990 is expected to be £8 million.

The increase in the PRSI ceilings needed to fund a general exemption for all employees, over and above the £11 million already allocated, would be:

Increase in Ceilings
(a)	£2,000	£11 million
(b)	£2,500	£17 million

The income gained from abolition of the ceiling would be £89 million this would be insufficient to fund a general exemption of £3,000 or £4,000.

The existing comprehensive system of social insurance has served the country well. Entitlement to benefits, on the basis of social insurance contributions made, is an accepted method of financing social welfare payments, as there is a direct link between payments made and rights to benefit. I am convinced that the future development of social welfare in Ireland should be based on social insurance schemes, complemented where necessary by suitable schemes of assistance. Coupled with this is the need to co-ordinate the tax and benefit system to focus resources, in a coherent fashion, on those in need, and to avoid poverty traps. The employee exemption scheme, announced in the budget, is another step in this process. I will be examining other measures to ensure that the social insurance contribution system contributes to the fullest extent to employment creation, in tandem with the ongoing changes in personal taxation structures.