Olwyn Enright (Laois-Offaly, Fine Gael)
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Question 60: To ask the Minister for Social and Family Affairs his strategy for the future of the Social Insurance Fund with reference to the recently published projections by Mercer of the future balance of the fund; the Government commitment to increase State pensions to €300 per week by 2012 and to reduce the rate of employee PRSI to 2%; and if he will make a statement on the matter. [26533/07]

Martin Cullen (Waterford, Fianna Fail)
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The second actuarial review of the Social Insurance Fund, which was required under section 10 of the Social Welfare (Consolidation) Act 2005, was published on 17 October 2007 in conjunction with the Green Paper on pensions. The focus of the review, which covers the period 2006-61, is the income of the Social Insurance Fund, including the accumulated surplus, the contributory pensions and benefits paid from the fund, including associated non-cash benefits, and other payments. The report examines matters from various aspects in the context of surpluses or deficits and projects the number of years for which the existing reserves can be used to keep contribution rates below break-even rates.

The findings of this review present a broadly similar picture to those of the previous review, published in 2002, and include that the fund will move from being in surplus to running a deficit in 2009; that on foot of the annual deficits from 2009, the accumulated surplus will be exhausted by 2016; and that the ratio of people of working age to people over pension age, or the pensioner support ratio is projected to fall from 5.6 to 1.81 over the period to 2061. In other words, today for every one person on a pension six people work but that ratio will fall to under 1:2 by 2061.

In the short term, the fund has sufficient resources to provide for the changes to the PRSI system and the increases in benefits committed to in the programme for Government. Decreasing contributions however, will both increase benefits and advance the time when Exchequer subvention will be required. Legislation provides that the Exchequer is the residual financier of the fund and Exchequer contributions to cover shortfalls in contributions were the norm for over 40 years. Any shortfall in the cost of benefits paid would, in the normal way, be addressed by Exchequer subvention. Other approaches to such an annual deficit would be a matter for the Government to consider in a future budgetary context. I am certain however, that whether in surplus or in deficit the Social Insurance Fund will continue to be the cornerstone of our social welfare system.

Olwyn Enright (Laois-Offaly, Fine Gael)
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The Minister will be aware of his party's commitments in its election manifesto and in the programme for Government to cut the PRSI rate from 4% to 2%, costing approximately €640 million, while at the same time committing to raising the pension by €100 over the lifetime of the Government. When these proposals were made, the Government had the report to which the Minister refers in its possession.

The Minister stated that the Exchequer has covered shortfalls for the last 40 years, which I accept. Is this the Government's long-term plan for the future? Will he take any immediate steps to counter this impending deficit? He did not seem to highlight any such steps in his reply. Is the Government prepared to let the fund continue in deficit and effectively let it go bust? That is the direction it seems to be taking. Has the Government abandoned its commitment to a self-financed social insurance fund, financed through PRSI?

Martin Cullen (Waterford, Fianna Fail)
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The best way to deal with all these matters is to keep employment very high, as we have done successfully in the last few years.

Olwyn Enright (Laois-Offaly, Fine Gael)
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The deficit is growing.

Martin Cullen (Waterford, Fianna Fail)
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Of course, because we have developed new policies that were unheard of five or six years ago.

Olwyn Enright (Laois-Offaly, Fine Gael)
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How is the Government going to pay for them?

Martin Cullen (Waterford, Fianna Fail)
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There are many different areas, such as disability and care. This has been made possible because we have such a strong economy and because we have such high employment. The debate has started — I welcome the Deputy's views on it — because I published the report and the other report along with the Green Paper on pensions. That is a very important debate that we will have to hold as a society and not just as Government and Opposition. The debate must be about the next 40 years and about the basis of pension contributions, about how private and public pensions are to be funded and about whether the onus on young people entering the workforce should be obligatory or not. These issues need to be resolved as we look forward.

Some of our other European counterparts have now entered this phase and have a serious issue with regard to pensions. We have a short window of opportunity to resolve this pensions issue. That will colour judgments on how the social insurance fund will be sourced and funded over the next few decades.

Olwyn Enright (Laois-Offaly, Fine Gael)
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I have to repeat the questions I asked the Minister, as he has not dealt with them. Has the Government abandoned its commitment to a self-financed social insurance fund through PRSI contributions, or is it seeking to allow it continue in the future? I appreciate the Green Paper has been published, but this issue must be dealt with in the immediate term, as we only have three years before the fund goes into deficit. What steps does the Minister intend to take to counter this impending deficit or is he simply going to wait until legislation following the Green Paper?

Martin Cullen (Waterford, Fianna Fail)
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I am not sure whether the Deputy is making a pronouncement on a new Fine Gael policy to increase the payments of individuals.

Olwyn Enright (Laois-Offaly, Fine Gael)
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This is priority Question Time and I am asking the Minister questions.

Martin Cullen (Waterford, Fianna Fail)
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That is what the Deputy seems to be suggesting.

Olwyn Enright (Laois-Offaly, Fine Gael)
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I have not announced any policy. I have asked a question.

Martin Cullen (Waterford, Fianna Fail)
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That is what the Deputy seems to be suggesting. The fund is only one aspect of how we finance all pensions.

Olwyn Enright (Laois-Offaly, Fine Gael)
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The question deals with the fund.

Martin Cullen (Waterford, Fianna Fail)
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I know that and I already answered the question at the start. The programme for Government sets out what we are doing. In parallel with that, there is a major debate on pensions which must be resolved. The Exchequer has always been the residual funder of the social insurance fund. It was so for 40 years.

Olwyn Enright (Laois-Offaly, Fine Gael)
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Is that what will happen in the future?

Martin Cullen (Waterford, Fianna Fail)
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We do not have a magical way to increase that fund, unless the Deputy wants to increase everybody's contributions.

Olwyn Enright (Laois-Offaly, Fine Gael)
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I have not asked that.

Martin Cullen (Waterford, Fianna Fail)
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The balance will be struck between what is in the fund, when the deficit will run out and what the Exchequer responsibility will be in making the commitments that are there. Let us be clear that all pensions are secure for the next number of years.