Caoimhghín Ó Caoláin
Question:112 Deputy Caoimhghín Ó Caoláin asked the Minister for Social and Family Affairs the steps she has taken to abolish the ceiling on PRSI. [34848/08]
View answerTuesday, 21 October 2008
Questions (19)
Oral answers (7 contributions)
Under the PRSI system, social insurance contributions are compulsorily payable by employers and employed and self-employed workers. In the case of employees' contributions, the amount payable is determined by reference to reckonable earnings in a weekly period and is subject to a range of thresholds and an annual ceiling.
The PRSI exemption on low earnings stands at €352 per week. In other words, incomes at or below that level are exempt from PRSI. In the case of workers who earn above this level, their total income, up to the annual ceiling, is chargeable to PRSI. However, they are entitled to a PRSI-free allowance of €127 per week. Approximately 76% of workers pay PRSI class A and class H at the rate of 4% and accrue entitlement to a range of benefits and pensions under various social insurance schemes.
The employee PRSI ceiling is reviewed annually in accordance with the legislative stipulations of the Social Welfare (Consolidation) Act 2005. The legislation requires that changes in the average earnings of workers, as recorded by the Central Statistics Office, be taken into account in this regard. In the 2009 budget, the employee ceiling was increased by €1,300 from €50,700 to €52,000, in line with projected increases in earnings for 2009.
The Actuarial Review of the Social Insurance Fund 2005 report, published last year, found that paying social insurance contributions represents good value for money in almost all circumstances. In particular, the report stated that those on lower incomes fare considerably better than those on higher incomes, with persons earning less than the gross average industrial wage paying 35% of the contributions but receiving 66% of the benefits. This finding demonstrates the solidarity principle of the social insurance system whereby contributions paid by insured persons are not actuarially linked to benefits but are instead redistributed to support contributors who are more vulnerable. It is an expression of solidarity between both earning groups and generations.
Any future changes to the PRSI ceiling must be considered in a budgetary context.
I thank the Minister for her contribution. However, she did not reply to the question, which related to any steps she may have taken to remove the ceiling on PRSI. Is she aware that such a removal would amount to an income stream of €334 million to the social insurance fund, thus offering a substantially greater saving than the €100 million to be gleaned by attacking pensioners over 70 years of age? Would such a move not be preferable to attacking, via the 1% so-called levy, low income workers, including those on the minimum wage? It would be far more equitable to go after those who can afford to pay. If the Minister does not agree, will she explain her reasoning?
It would not be appropriate for me to comment on any measures being discussed in the context of the budget. Deputy Morgan referred to what are revenue-raising measures for the Exchequer. However, PRSI contributions go directly into the social insurance fund and cannot be diverted for other purposes. Any changes in PRSI provisions must be made with the agreement of the Minister for Finance. Savings across other Departments do not impact on the fund and PRSI receipts do not impact on the Exchequer.
In her contribution in the budget debate, the Minister told us that expenditure this year in regard to the social insurance fund would exceed income by €200 million and that this shortfall is expected to increase to €900 million next year. Will she explain how it is proposed to plug that hole this year and next? Given the size of the gap, why did the Government not fulfil its undertaking in the programme for Government to lift the ceiling on PRSI? The change announced in the budget is marginal.
The current deficit in the fund can be met in this and for some future years from the accumulated surplus. Therefore, there is no need as yet to plug the gap. However, it will be important to keep the situation under review. We must examine all revenue-raising measures and savings in terms of how they impact on families. This is one of the measures that is kept under review by both Departments. For now, that shortfall can be met from the surplus.
I had a slip of the tongue in referring to the Exchequer. We all anticipate that there will be a significant number of additional social welfare recipients in the coming 12 months. Why would the Minister not want to have at her disposal the additional funding that would arise from abolishing the PRSI ceiling in order to meet the needs of those who will require assistance? Why has she not pressed the Minister for Finance to take this route?
I have not made any comment on discussions that have taken place in regard to the budget. I am not at liberty to do so.