Several Deputies made speeches that would be more appropriate to a Second Stage debate, ranging over various points. I do not intend to deal with the treatment benefit issue again because I dealt with that last night. I shall deal with some of the other matters raised after the discussion on section 7.
Section 7 provides for an increase in the ceiling up to which PRSI contributions are payable by both employees and employers. The new ceiling for employees will be £19,000 and the new ceiling for employers will be £20,300 and they will take effect from 6 April 1992.
Throughout the debate on the Bill mention has been made of an attack on the social insurance system. I well remember the debate that took place back in the 1970s, before I was a Member of the Dáil, about a pay-related social insurance system. Deputy Michael Bell spoke about a green fields situation. As I said earlier in the debate, I know that if we were to again set up a system for either tax or social insurance the systems evolved would not be so complicated and diverse. In explaining that point I used the analogy of the Frank Kelly tape. The concept outlined by Deputy Bell was in line with the trade union movement thinking of the 1970s. He outlined the concept in a much better way than I would be able to. In the purest form of that concept there would be no floors and no ceilings and everyone would be included.
Like many things in Irish life, the original idea was very good. Due to financial constraints, successive Governments of different make-ups made changes. It is the case with many schemes — and not only social welfare schemes, I think of income tax schemes and also agricultural schemes — that when the changes are made most people forget the original intention of the scheme. I have often said that most people have forgotten the economic theory that backs up the idea of a current budget deficit. The underlying economic theory behind the current budget deficit is quite sensible, but the budget deficit has now become part of the system and its existence is accepted.
I can call to mind many schemes administered by many Departments of State, the original purpose of which has been totally lost. What has happened has been that those schemes have developed a type of organic growth within themselves which has continued; people keep changing and tinkering with their provisions. As regards the purest form of the concept, Deputy Bell is absolutely correct. I well remember when Deputy Bell was first elected to this House he spoke against that proposal and got himself into hot water. I had not been very long a Member of this House when I got myself into hot water with my party although I was probably a Member somewhat longer than Deputy Bell; I think I sustained a clean record for approximately two years, whereas he did not even reach that point. He took a stand on that matter. I can understand the passionate manner in which he spoke last evening on a subject very dear to his heart. He also said something very sensibly, that he is prepared to accept the logic of the purest concept of the system, as did Deputy Byrne last evening, that everybody should be included in the system, eligible for everything regardless of one's income. If at present people advocated that course I am sure we would have employers and some of the unions up in arms because it has now become part of the tax system.
While contending we may have bastardised the system somewhat, the Deputy went further and asked, since the system has been changed so drastically, would it not be better to revert to a straight system. While that may not be the phrase he used I understand the implications: let us forget about the total, merely regard it as a contribution going into the Exchequer, resulting in a straight system. I agree with him that over the years the original idea of a pay-related social insurance system, as advocated in its purest form, has been changed drastically.
At various stages in the debate Deputy Byrne has attacked me, contending that I am doing away with the concept of the social insurance system and so on. This morning he inferred that the Commission on Social Welfare did not advocate this. For the benefit of the Deputy I quote as follows from page 274 of the report of the Commission on Social Welfare what they say about social insurance:
We accept that social insurance can be validly perceived as a form of insurance. But it is inappropriate, in our view, that social insurance be directly compared with private, commercial insurance.
Further on in the same paragraph they had this to say:
Social insurance, as a form of collective, social provision and as an expression of social solidarity, is different in principle and in practice to private insurance. There is no contradiction, in our view, between the assertion of an insurance dimension and the recognition that social insurance contributions in their incidence and distributive effects may also be evaluated as a form of taxation.
Backing up the point made by Deputies Bell, Byrne and others, the commission recommended in that chapter:
PRSI should be extended to all employee income, without a ceiling.
I dealt ad infinitum over the past two days with the social dimension and I do not intend to repeat those arguments or cover the same ground.
If, in the purest form of the concept, every person in the county was to be included in the system, simultaneously, whether we like it or not, we must also acknowledge that it is now regarded as forming part of the negotiations that take place between the Government, social partners, unions and employers. Indeed it is also taken into account within the context of tax reforms and/or reductions. This would mean that everybody without exception, including civil servants, would have to be included, which would please some and displease others. It is not possible for me, within the provisions of this Bill, to do anything about it. As Deputy Bell said, it is a matter for another day, one which should be the subject of collective thinking on the part of everybody interested. I do accept what he has said, that we have deviated totally from the original principle, as has been the case with many other schemes.
Deputy Connaughton raised a subject very dear to my heart, that of self-employed PRSI contributions. In the short time I have been in this Department, a few weeks ago in fact, I asked some of my officials to examine anomalies that arise with regard to certain categories of PRSI. I would have dealt with them in my former capacity over the past couple of years. I have in mind not merely those anomalies to which the Deputy referred but those obtaining that contain no logic at all and which were probably never intended. Take the example of a person, say, aged 64 on 6 April 1988 who, having paid contributions for the two years thought he would qualify, but discovers he does not and would be unable to recoup those contributions. That was one case brought to my attention quite recently. That person had been in insurable employment for a very brief period — I think it must have been a holiday-type job he had; he was not a client of mine — but pre-1944 he had clocked up about ten contributions as a student and because of the manner in which the legislation is framed, he is not eligible for the pension for which he had thought he would be eligible. Neither will he be reimbursed the contributions he had paid. I should say there are many administrative anomalies even in the collection of PRSI contributions in the case of people whose income falls below the tax threshold, those without a tax liability, in that despite one's best efforts the Revenue Commissioners will not deduct such contributions. There are many other anomalies obtaining. I hope to have all of the anomalies that have come to light eliminated over the next few years.
I remember speaking in the House at the time of the introduction of self-employed PRSI contributions. I think it was my party who were in Government at the time but I know I did question the actuarial costs of that scheme while recognising that it was a tremendous idea. As the Deputy and I well know, there are hundreds of self-employed people engaged in very small businesses, be it carpentry, building, shopkeeping or whatever who, on reaching the age of, say, 68, 69 or 70 must continue to work because they know they will not get benefit. It is an excellent idea, in principle, of which I was very much in favour at the time while entering the caveat that I thought the costs had been under-estimated. We shall have to ascertain what they will be in years to come.
The idea of pro rata pensions has been proposed by the IFA over a number of years. In theory that is a proposal I would favour. I remember speaking at a conference on this subject when it was first mooted, contending that if one had been contributing over seven or eight years one should reap some percentage of pension. I have examined that matter in recent weeks and find there are other implications involved. I know that my predecessor, Deputy Woods, spoke about this as well, saying he would like to travel down that road. While we would like to travel that road, I would have to point out that there are cost implications. There are implications also in that over a period of time people in insured employment have been granted pro rata pensions if they do not have the requisite contributions. Remember we must think of people in insured employment as well, because their average is calculated over a longer period. We would not want to create inequity by making, say, a farmer or self-employed individual, who may have contributed over seven years, eligible, while making ineligible another person who may have worked on and off over a period of 30 years and who might not have the average contributions. Over the past few years we have gone some of the way in regard to pro rata pensions. But I am aware there are various problems to be teased out.
I listened to what Deputy Byrne said about the report of the Commission on Social Welfare and everything else. However, he made one point I would have to correct. I referred last night to the fact of pensioners being vulnerable and so on. Again there was a big song and dance about the dentists. I shall not refer to them again today. I will just correct the general point. It is my belief that if we do not control expenditure in these areas people at the worst end of the scales will become the victims, in that in years to come the State would be unable to support the old and the sick. We will have to maintain some control over public expenditure. I have said this over many years as a back bencher, indeed in speeches nationwide over a period of ten years. I might add that, since being appointed Minister, I have not changed my views on it. Indeed I am now more convinced than ever. I referred to the demographic statistics demonstrating that, over the past two years, our population have been highly dependent on social welfare benefits. I will not go into that aspect now.