asked the Minister for Social Welfare if he has any plans to restructure or eliminate the system of PRSI; and if he will make a statement on the matter.
Ceisteanna — Questions. Oral Answers. - PRSI System.
9.
The social security system in this country is based on the twin pillars of social insurance and social assistance. Under the social insurance system, entitlements are determined by reference to the individual's record of contributions and payments are made from the social insurance fund which is a separate fund for this purpose financed by employer and employee contributions with the Exchequer making up any deficit. The social assistance system caters for those who do not qualify for a social insurance payment and entitlements under that system are subject to means test. The cost of social assistance is borne by the Exchequer.
Social insurance provides comprehensive occupational protection for workers and their families. It meets employer and employee obligations as required by internationally accepted standards of social security. Our social insurance scheme has been an integral feature of the social security system and its benefits in terms of providing payments as of right and without means test are widely accepted. Measures taken over the years, such as the abolition of the remuneration limit for social insurance in 1974 and the introduction of fully pay-related (PRSI) contributions in 1979 have made the system more comprehensive in its coverage and more progressive in its financing. More recently, the extension of social insurance coverage for pensions to the self-employed, including farmers, has been a major development in widening the scope of the system and providing the security of a social insurance pension for a large segment of the workforce who were previously excluded from the system.
There are no plans at present to alter the basic structure of the social insurance system. The question of extending the social insurance coverage of those categories whose coverage at present is limited to certain benefits is under consideration. Furthermore the National Pensions Board is currently examining the question of the provision of a national pensions scheme and its final report is expected in 1989. This report will have implications for the social insurance system, and the question of changes in the system arising from the recommendations in the report will have to be considered.
Has the Minister given any thought to reforming the payment structures of employers' RSI and employees' RSI from the point of view of encouraging job creation? Does he not accept that such payment structures act as a disincentive?
My purpose is to provide social security protection for employees, a purpose shared by our partners in the EC. In regard to the position vis-á-vis competition I might make the salient point that our rates of payment are lower than most in the EC, so that they should not be regarded as putting our employers at a disadvantage vis-á-vis competition with their counterparts in the EC.
The Minister said that our employers' rates were equivalent to those obtaining in the remainder of the Community. Does he not accept that our main trading partner in the Community is Great Britain where the rate for employers is 3 per cent lower than that obtaining here — 9 per cent rather than over 12 per cent — and that one of our other major trading partners, Denmark, has virtually eliminated employers' PRSI? How then can he contend that our position is comparable with that of other members of the EC?
The Deputy may not be aware that the upper limit in Britain has been removed entirely, so that there is now no upper limit obtaining there with regard to contributions.
Their rate is still only three-quarters of ours.
Would the Minister agree that, in a country where it costs employers by way of payroll costs £3 to give an employee £1 in take-home pay, PRSI and taxes combined act as a disincentive to employment? Would the Minister consider eliminating PRSI contributions on the first £3,000 of income thereby constituting a better way of helping low income earners than the provisions of the present family income supplement which have not been successful?
It is essential that we recognise the importance of the PRSI system to workers in that their entitlements are built up through the system over the years so that they have cover for pensions, widows, sickness and invalidity. Indeed this is a very important feature of the partnership between employers and employees.
This is waffle.
I would be very reluctant to see that right of an employee — one which is present throughout the remainder of the EC — abolished. The question of not paying contributions below a certain level would have wide cost implications. Perhaps the taxation system would constitute a more appropriate area within which to launch such an attack. I appreciate the Deputy's point that the question of having lower payments for lower paid people would have wide cost implications.
The Minister will recall addressing these matters earlier on the debate on the Social Welfare Bill when I tabled amendments exactly along the lines suggested by Deputy Harney.
Given the fact that we have the highest unemployment rate within the OECD countries, would he not agree that dramatic and radical steps must be taken to remove all disincentives to employment and that the PRSI system, as at present constituted, amounts to a payroll tax on employment whereas capital and plant are not subject to any taxes but rather to the receipt of grants? Would he not agree that a radical rethink of the base of the PRSI system is now in order?
I am always concerned when I hear of radical proposals to attack the PRSI system——
To reform it.
——because it is very important from the point of view of the employee. The evidence emanating from studies carried out does not support the contention that reducing or eliminating PRSI contributions would increase jobs. Certainly, on a comparative basis within Europe, we pay relatively low PRSI at employer level.
The Minister does not care and is out of touch.
I know what all right-wing Deputies want to do, and they will not be able to do so while I am in office anyway.
The final insult.
One does not hear Deputy Mac Giolla calling for it because he knows that this constitutes bread and butter for the worker, the most important support he can have.
That is what we want, more workers not less.
I know what the Deputy wants.
Interruptions must cease. I am calling Question No. 10.