Brian Cowen (Laois-Offaly, Fianna Fail)

Other issues were also raised by the court, although they were not part of its judgment and no opinions were given. It has been suggested that there is just one little problem that needed to be resolved, and which should have been resolved in the last year or two. However, to bring forward the legislative proposal would probably involve a further court challenge by competitors in the market and put us in the precisely the same position we were in already. We devised a tax-based solution in terms of the levy taxed at source, which was increased before Christmas from 50% to 65%. It increases the subsidy from young lives to older lives where the differential between the cost of plans between younger and older lives is attributed for the older person by 65% of the difference being provided for by the younger life. To do that in a way that did not attract a challenge was an important innovation.

Given the commercial freedom of the VHI, it was that organisation's decision to increase these fees. It was not a matter for the Government to deal with in that sense. The VHI had the authority to do that. The purpose is to set up help lines with the HIA to ensure that people get an opportunity and are made aware how they can transfer if they so wish. They have an entitlement to similar plans they already have under the VHI, which would help to reduce costs. Some 62% of all subscribers are with the VHI and 80% of those are elderly. The VHI lost €172 million last year and to avoid trading recklessly, the board has had to take its decisions.

We must ensure that the spread of risk is facilitated by reason of the fact that there is a legal entitlement for people to have the same entitlements they have under the VHI plans elsewhere if they are getting a more competitive rate. That will help initially but the introduction of risk equalisation, which requires EU approval to come in by 2013, is the way forward. Legislation will be introduced during the course of this year to try to give it some transitional effect in 2012. We have set that out as the policy objective since May last year.

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