Vol. 436 No. 2
7 Ms O'Donnell asked the Minister for Social Welfare if he will make a statement on recent reports that he intends to submit proposals to Government to introduce a two-tiered PRSI system for employers, with a lower rate of 6.6 per cent for certain industries; the way in which he proposes to select industries which will benefit from such lower rates; and if he will make a statement on the matter.
As the Minister responsible for the pay related social insurance system, I am determined that no avenue should remain unexplored in our national effort to generate new jobs and preserve existing employment. The case has been made that reducing the rate of employers' contributions would provide a boost to firms which are struggling to increase or retain their business and employment, particularly in sectors such as clothing which are vulnerable to lower cost competition from abroad and where payroll represents a major part of the firm's total costs. I recently met representatives of the Irish Clothing and Manufacturers' Federation who argued strongly along these lines.
I confirm that I am examining the possibility of restructuring the system of employers' PRSI contributions with a view to easing the burden on such sectors. I shall shortly be receiving the report of the interdepartmental committee established to examine the employment impact of employers' PRSI on low paid labour-intensive industries which has been looking at options in this area.
The option mentioned by the Deputy — a two tiered system targeted on certain industries — is one of a number of options I will be considering. However, cost and administrative considerations have to be taken into account. My proposals will take account of the need to safeguard the Social Insurance Fund on which workers depend for their benefit and pension entitlements.
I intend to bring forward proposals to address this issue in time for the forthcoming budget.
I am glad that the Minister is looking positively at the proposals made by the Irish Clothing and Manufacturers' Federation. Given that 454 jobs have been lost in the sector this year, it is particularly vulnerable and some intervention is needed. The high labour costs and the loss of competitiveness vis-à-vis the UK, in particular, is causing difficulties. The case has been made that reducing the rate of employers' PRSI contributions is vital to redressing uncompetitiveness and I am glad the Minister is dealing with this. However, if the system operating in the UK was put in place here, would the Minister take account of the higher marginal cost of wages so that the lower rate of PRSI would apply on wages up to £9,000 per annum?
Our rates of PRSI are among the lowest in Europe, but compared to Britain we have special difficulties. The comparison is twofold: first, our wages are higher while in Britain there is a sliding scale of PRSI but no ceiling on employers' contributions. The percentage take is on the total income whereas our ceiling is reached on incomes of £21,300. We must make provisions in the context of all those elements while maintaining the position of the social welfare fund. I am concerned that we are able to provide the benefits for the workers as their benefits and pensions must be preserved. I do not want to see such benefits means tested. My main concern is to ensure that the benefits are preserved, most workers agree with that.
Members from all parties agree that the social insurance fund must be protected for all the workers who avail of it. However, Irish clothing manufacturers are in crisis. If clothing factories continue to close down at the current rate we will not only lose the revenue from employers' and employees' PRSI contributions but from tax revenue. Does the Minister agree that intervention is worth while?
I do not want to engage in a general debate but there are other relevant issues. Some segments of the industry do not have problems because of marketing and other competitive reasons. The solution is not quite as simple as the Minister addressing the question of PRSI contributions, although in particular areas it is part of the solution to the problem.
