Willie Penrose (Westmeath, Labour)
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Question 37: To ask the Minister for Social and Family Affairs the surplus in the social insurance fund for each year from 2002; and if he will make a statement on the matter. [15185/07]

Séamus Brennan (Dublin South, Fianna Fail)
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The social insurance fund derives its income mainly from pay-related social insurance contributions from both employers and employees. It provides insured contributors with both long-term pension benefits and short-term benefits such as unemployment and disability payments.

The cumulative surplus in the social insurance fund since 2002 was €1.273 billion in 2002, €1.529 billion in 2003, €1.906 billion in 2004, €2.4 billion in 2005 and, provisionally, €3.070 billion in 2007. This increasing cumulative surplus in the fund is the continuation of a trend which commenced in 1997 when a surplus arose for the first time since the fund was established in 1953.

In the previous 44 years, there was a shortfall between the amount of income received into the fund and the amount of expenditure paid out of it. This was made up by an Exchequer subvention in each year, as provided for under the Social Welfare Acts.

The Acts also provide for the investment of the amount of the surplus arising in the fund. The investment account of the fund is managed by the National Treasury Management Agency, subject to guidelines issued by the Minister for Finance. The total amount of interest received on investment since the fund came into surplus in 1997 is €329 million.

Willie Penrose (Westmeath, Labour)
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The proposal to reduce PRSI contributions from 4% to 2% could lead to a shortfall of €645 million. With this shortfall, if the surplus stands at €3 billion, it will only take five years for it to disappear. All parties are committed to increasing the old age pension to €300 per week. Could the situation emerge that the Exchequer will have to pay between €800 million and €1 billion into the social insurance fund? Is the Minister concerned that the surplus will dissipate? Steps were taken to ensure it would not be raided by Governments. Workers rightfully point out they have paid for their pensions and are entitled to them. It behoves us all to ensure the moneys in the social insurance fund are protected and that the current trend of using the surplus is continued, so as to provide further increases and widen the scope of payments.

Does the Minister know the ratio for workers contributing PRSI to pensioners receiving payments? That is an important statistic and one upon which all pension policy must be predicated.

Séamus Brennan (Dublin South, Fianna Fail)
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There are 2.8 million contributors to the social insurance fund. Expenditure in 2005 was €5.6 billion, a substantial part of which went to pensioners and the income to the fund was €6.1 billion. Employment is strong and income from employment is growing. The review before the Government examines it from 2006 to 2061, a long-term financial economic strategic review. In the short term, the fund is likely to be very sustainable. However, as demographics change and we head from a 4:1 to a 2:1 worker to pensioner ratio in the next 50 years, the costs of pensions will grow substantially. That is why the Green Paper will assist in the debate on pensions.

For example, there is a commitment to increase the State contributory pension to €300 a week. That will cost approximately €1.5 billion. Proposed increases in other social welfare payments will bring the cost to €2 billion in a full year. The social insurance fund must be maintained in a healthy position. For 40 years it was in deficit but in the past decade it has been in surplus. It is the Government's intention that it will remain so. Any policy decisions which affect the fund's surplus must be made up by the Exchequer. Undeniably, there will be pressures on the fund in the long term.

David Stanton (Cork East, Fine Gael)
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The Taoiseach has proposed a reduction in PRSI contributions from 4% to 2%. If this leads to a deficit in the social insurance fund, will the Exchequer reimburse it?

Séamus Brennan (Dublin South, Fianna Fail)
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The legal requirement is that if the fund is in deficit, it must be reimbursed by the Exchequer. This side of the House has committed to reducing the PRSI contribution from 4% to 2%. If this policy decision affects the fund, it is open to the Government to reimburse the fund directly for the amount involved.

David Stanton (Cork East, Fine Gael)
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Is the Minister saying that will happen?

Séamus Brennan (Dublin South, Fianna Fail)
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That can be considered. It is not intended the fund will go into deficit as a result of this policy.

David Stanton (Cork East, Fine Gael)
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The Minister implied it might.

Séamus Brennan (Dublin South, Fianna Fail)
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When we get the study, which will show us the outlook for the fund in the years ahead, we will have a better view as to the likelihood of it going into deficit. I certainly do not envisage that in the short, or medium, term but it is a possibility in the long term given the demographic pressures on the fund. I wish to reassure the House that any proposals which would affect the fund or put it into deficit must, legally, be made up by the Exchequer for the taxpayer. Taxpayers have paid this PRSI for a long time. PRSI is a tax on work which is why we are determined to try to reduce it and give people more take home pay.

Dan Boyle (Cork South Central, Green Party)
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Is there not a contradiction in what the Minister said? He said he is trying to maintain a social insurance fund and yet reduce the inputs to it. It seems utterly nonsensical. The Minister will have an opportunity to try to explain that in the coming weeks. Despite asking for it repeatedly, information on the cumulative deficit in the social insurance fund since its inception to 1997 has never been supplied to this House. It would be very helpful if that information was supplied. How many billions of euro did the State have to put into this fund until it went into surplus in 1997?

Séamus Brennan (Dublin South, Fianna Fail)
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Some €5 billion for the 40 or so years.

Dan Boyle (Cork South Central, Green Party)
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The cumulative deficit is far less than the surplus in the past ten years. The State has been more than compensated for having to add to this fund. In reality, the fund has been in surplus since its inception because of the surpluses over the past ten years alone. Is that what the Minister is saying?

Séamus Brennan (Dublin South, Fianna Fail)
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The fund was in deficit from 1953 to 1996 at which point the cumulative deficit came to €5.4 billion. Over those years that €5.4 billion was made up by the Exchequer.

Dan Boyle (Cork South Central, Green Party)
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Will the Minister explain his or his party's policy proposal in regard to reducing the inputs to the fund regardless of employment in the economy and how that is meant to maintain the existing surpluses in this fund?

Willie Penrose (Westmeath, Labour)
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This is like trying to square a circle. If the Minister is trying to maintain the surplus under which the social insurance fund operates, that is a very laudable objective. However, the proposal is to decrease the amount of money going into the fund by €645 million per year based on current projections. How can one square that circle while, at the same time, the ratio of PRSI payers to pensioners is falling from 4:1 to 2:1? Fewer people will contribute to the fund, although more money will go out because we are committed to giving more money to pensioners and to other payments, and rightly so.

The Minister said that will cost approximately €2 billion. An additional €2 billion will go out while €645 million less will go into the fund. How will we maintain the fund in surplus? Did the 2002 report on the Minister's desk tell us not to decrease PRSI contributions but to increase them?

I agree with the Minister who said PRSI is a tax on work. However, there is no use deceiving workers because we will tax them in order to make up the shortfall in the social insurance fund. We had better tell the truth.

David Stanton (Cork East, Fine Gael)
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It is robbing Peter to pay Paul.

Willie Penrose (Westmeath, Labour)
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It is worse than robbing Peter; one is robbing Paul as well.

Séamus Brennan (Dublin South, Fianna Fail)
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There is a cost. If one proposes to reduce PRSI from 4% to 2%, which is a tax on people who pay their taxes and for which they have been paying through the nose for a long time, it will cost money. That will come from the general pool of taxation. That is from where any deficit in the fund must be made up. The taxpayer will pay for a proposal to reduce PRSI from 4% to 2%. I invite the parties opposite to accept that policy because we are talking about a generation of people paying substantial PRSI who now have the opportunity to see the tax on the work they do reduced and spread more evenly because, obviously, the 2% will apply to people on the higher rate, which has not been mentioned until now. More people will pay. As the economy expands, presumably more will come into the fund. It is time we gave back some of the PRSI to hard pressed wage earners. That is what the Government unapologetically proposes to put before the people in the coming general election.