Professor Alan Barrett:

I have a couple of thoughts on the Deputy's question about tax incentives and whether people could save more. If a basic earnings-related mandatory scheme was introduced, utilising payments from the USC to do that, there would be no need for incentives. There is no need to incentivise things that are mandatory. That does not make sense. The Deputy might say that the State should, perhaps, be subsidising schemes, but that is a different conceptualisation. The current tax arrangement is to incentivise, but if a scheme is mandatory there is no need to incentivise.

The Deputy asked what would be the position if people wanted to put more into their pensions. The core argument is that if people want to put more in that is up to them, but why would the State be subsidising people putting more into a pension pot? It is a bit like a whole range of things in life in that beyond a certain point people can do what they want but they do not need the State to subsidise.

On the PRD, one could imagine a situation in which the public sector arrangement were aligned with the private sector arrangement. This issue was discussed at the National Economic Dialogue. The concern for the officials of the Department of Public Expenditure and Reform would be whether what is being proposed is a defined benefit or defined contribution system, because there is real concern that the State is building up huge exposure in this area. These are issues that can be fleshed out. People other than me have thought about these matters at considerable length. I wrote it up because I think it is an interesting idea. If there is a real move towards a reduction in USC, it is interesting to add this additional policy consideration.