Dáil Éireann debate -
Tuesday, 14 Jun 1994

Vol. 443 No. 7

Written Answers. - PRSI Rate.

Peadar Clohessy

Question:

17 Mr. Clohessy asked the Minister for Social Welfare if he will consider a single lower rate of PRSI to be applied to all income, with no exemption and no ceiling, thus helping low paid workers and reducing the severity of unemployment and poverty traps and producing a better tax rate schedule; and if he will make a statement on the matter.

Minister for Social Welfare (Dr. Woods)

As Minister for Social Welfare I am primarily responsible for the provision of social insurance benefits and pensions and for the management of the social insurance fund so that it is adequate to meet the obligations incurred by the fund. I am also determined that no avenue should remain unexplored in our national effort to create new jobs, preserve existing ones, and in doing so, reduce the risk of poverty.

I have over a number of years, while meeting the needs of the social insurance fund, taken measures to ensure that the social insurance system operates as far as possible to encourage employment.

In 1992, I introduced the employers' PRSI exemption scheme whereby employers who take on additional full-time employees directly from the live register will not have to pay the employer element of the PRSI contribution in respect of such employees for two full years.

This year I introduced three main PRSI changes, as part of a PRSI package aimed at creating and preserving employment:

—the introduction of a two-tier employers' PRSI contribution structure, with a new lower rate of 9 per cent applying in respect of employees earning less than £173 per week,

—the extension of the employers' PRSI exemption scheme under which employers pay no PRSI for two years in respect of new employees taken on from the live register,

—the waiving of the employer's liability to pay the health contribution and employment and training levy on behalf of employees who hold medical cards.

These changes taken together with measures on the employee side such as improvements in family income supplement, the abolition of the temporary 1 per cent levy and the relaxation of the means test for lone parents in employment, add up to a substantial package of measures designed to provide a stimulus to employment and economic growth. They support workers on lower incomes where reform has potentially the greatest effect on employment.

The scope to reduce the main employee's rate of social insurance is, however, more limited than the Deputy's question might suggest. Abolition of the ceiling would give some scope for a general reduction in the rate, but this would obviously have serious effects for people on middle and upper levels of earnings. The benefits of PRSI exemption are seen at the lower end of the income distribution. I would view the introduction of any general levies at lower incomes as a retrogressive step. The response to the measures so far introduced has been positive and I will keep this situation under review.