Dáil Éireann Debate, Wednesday - 6 July 2016
145. Deputy Niall Collins asked the Minister for Social Protection the cost of extending social protection supports to the self-employed and permitting such persons to opt into the existing class A structure, paying the rate corresponding to their income levels over a calendar year; and if he will make a statement on the matter. [19999/16]
View answerProviding a supportive environment for enterprise and employment is fundamental to achieving the Government’s aim of job creation. In particular, the role of entrepreneurs and the self-employed will be central to this ambition.
The new Programme for a Partnership Government contains a commitment to introduce an improved PRSI scheme for the self-employed. In addition, we will also ensure that the Earned Income Tax Credit available to the self-employed will match that available to employees, over a number of budgets. This process commenced in Budget 2016 with the introduction of a €550 tax credit for the self-employed. I want to ensure that appropriate sustainable supports are available to the self-employed in the event of certain contingencies arising
The self-employed have been liable for compulsory social insurance since 1988. The self-employed persons pay PRSI at the class S rate of 4% and are covered for the following benefits: State pension (contributory) and Widow’s, Widower’s or Surviving Civil Partner’s Pension (contributory), Guardian’s Payment (contributory), Maternity Benefit and Adoptive Benefit. Self-employed contributors will also be entitled to the new Paternity Benefit to be introduced later this year. The schemes to which the self-employed have access to amount to €6.3 billion out of a total SIF scheme spend of €8.4 billion, or 75% of SIF expenditure.
The schemes to which the self-employed do not have access are: Jobseeker’s Benefit, Illness Benefit, Partial Capacity Benefit, Invalidity Pension, Health and Safety Benefit, Carer’s Benefit, Treatment Benefit, Occupational Injuries Benefits including Disablement Benefit.
The cost of extending certain short-term social insurance benefits was considered in the Actuarial Review of the Social Insurance Fund, as at 31 December 2010. The report found that:
i. the effective annual rate of contribution required to provide the core full-rate State Pension (contributory) is approximately 15% at national average earnings. This compares very favourably with the 4% currently paid by the self-employed.
ii. An incremental increase of 1% in contribution rates would be required if Jobseeker’s Benefit in addition core State Pension (contributory) is provided.
iii. The average contribution rate required for the core State Pension (contributory) plus the Invalidity Pension is estimated to be in the region of 2%.
Using a number of assumptions based on the existing population of contributors and beneficiaries, the Actuarial Review report estimated the full year incremental costs of extending Jobseeker’s Benefit and Invalidity Pension to the self-employed, stated in 2012 terms, to be €87m and €78m in a full year, respectively. This is based on two principal assumptions, namely that the incidence rate of benefit is the same as that applying to the overall population and that the extended scheme reaches full “maturity” in terms of the numbers of additional beneficiaries with immediate effect. It is possible, in practice that the incidence rate may be different and it is likely that the scheme will take time to reach full maturity.
The former Advisory Group on Tax and Social Welfare published a report in 2013 which examined the options for extension of cover to the self-employed. The Group found that extending social insurance for the self-employed was warranted in cases related to long term sickness or injuries. To this end, the Group recommended that Class S benefits should be extended to provide cover for people who are permanently incapable of work, because of a long-term illness or incapacity.
The Group further recommended that the extension of social insurance should be on a compulsory basis and that the rate of contribution for class S should be increased by at least 1.5 percentage points. The Group concluded that "extension on a voluntary basis, through either an “opt in” or “opt out” basis, could lead to the selection of bad risks and would undermine the social solidarity and contributory principles that underline the social insurance system.”
I intend to extend, over a period of time, the range of benefits which the self–employed can access through the social insurance system, with particular reference to providing access to benefits for long-term illness/incapacity and treatment benefits. My Department is currently examining the costs and financing of such an extension of benefits as well as the phasing in of access to the benefits. This examination will have to include the level of appropriate additional contribution the self-employed should make for more benefits.
I look forward to making progress on this issue regarding specific proposals, as well as providing later this year a timeframe for implementation.
