Dr. Tom McDonnell:

I was making the point that we have to avoid cliff edges in terms of loss of potential supports, including bidding non-income supports. What you do there is you have a system of tapering. Rather than taking away benefits in their entirety upon reaching a particular income in terms of wages or whatever, you would taper the benefits so they would gradually be eroded over time. Even with benefits that do not necessarily have a nominal cash value, such as the medical card, there could be reduced subsidies as wage levels increase, for example. There are solutions to all of these problems. Ultimately, the Irish system does a very good job of having very low marginal effective tax rates for most low-pay workers. The marginal effective tax rate takes into account the loss of benefits. There is only a very small cohort of workers who have very high replacement rates. Compared with other European countries, we do quite well there. I agree that it is something we need to maintain. One has to consider the wisdom of increasing tax rates on low-pay workers, for example. Obviously, there are revenue considerations, looking to the future, but perhaps there are better ways to do it. Ultimately, as well as increasing rates and thresholds, it means wages going up as well. That means the standard rate cut-off point, the USC and income tax bands, and the whole system effectively, becomes indexed, not just the welfare system.