Arthur Morgan (Louth, Sinn Fein)
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Question 6: To ask the Minister for Social and Family Affairs the expected gain to the Exchequer if the PRSI ceiling was abolished; and if she will make a statement on the matter. [23142/09]

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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The PRSI system is based on the contributory and solidarity principles. The contributory principle ensures there is a direct link between the contributions paid and the range of benefits and pensions to which the person is entitled. The solidarity principle relates to the redistributive nature of the system which ensures supports are provided to more vulnerable workers.

Current estimates indicate that the abolition of the PRSI ceiling would yield approximately €119.5 million additional contribution income in a full year.

Under the PRSI system social insurance contributions are compulsorily payable by employers, employees and self-employed workers. With regard to employees' contributions the amount payable is determined by reference to reckonable earnings in a weekly period, and is subject to a range of thresholds and an annual ceiling. Approximately 76% of workers pay PRSI Class A and Class H at the rate of 4% and accrue entitlement to a range of benefits and pensions under various social insurance schemes.

The PRSI exemption on low earnings stands at €352 per week. People with incomes at that level or below are exempt from PRSI. Once a person earns above this level their total income, up to the annual ceiling, is chargeable to PRSI but they are entitled to a PRSI-free allowance of €127 per week.

The employee PRSI ceiling is reviewed annually in accordance with the legislative stipulations of the Social Welfare (Consolidation) Act 2005. In the 2009 budget the employee ceiling was increased by €1,300 from €50,700 to €52,000; and in the supplementary budget a more substantial increase brought it to €75,036.

The Actuarial Review of the Social Insurance Fund 2005 report, published in 2007, found that paying social insurance contributions represents very good value for money in almost all circumstances. In particular, the report stated that those on lower incomes fare considerably better than those on higher incomes, with persons earning less than the gross average industrial wage paying 35% of the contributions and receiving 66% of the benefits.

This finding demonstrates the solidarity principle of the social insurance scheme whereby contributions paid by insured persons are not actuarially linked to benefits but are instead redistributed to support contributors who are more vulnerable. It is an expression of solidarity between both earning groups and generations.

Any future changes to the PRSI ceiling would have to be considered in a budgetary context.

Arthur Morgan (Louth, Sinn Fein)
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I thank the Minister for her reply. Why was the PRSI ceiling not abolished in the budget of 7 April? Does the Minister accept that the threshold deals only with people who could be regarded as being on reasonably high incomes? Does she consider that the €19.5 million that could have been achieved with the abolition of the ceiling is not necessary and that there is sufficient funding without it? Can the Minister give us any good reason it was not abolished in the budget? I acknowledge that the ceiling was raised in the budget but why was it not abolished?

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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As I indicated, €103.5 million will be raised through the change in the ceiling this year. Abolition of the ceiling would have to be seen in the context of all other financial measures introduced in the most recent budget including the income levy. The main aim of that budget with regard to income was to ensure that money was made available to the Exchequer. Any funding through PRSI would not go to the Exchequer but to the social insurance fund. It would not have resolved the main problem that we had for that budget. Raising the ceiling impacted severely on a number of workers and achieved at least the target of €103.5 million but it has to be seen in the overall context of the other measures introduced by the Department of Finance.

Róisín Shortall (Dublin North West, Labour)
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From next year there will be a shortfall in the social insurance budget so it would impact on it. I smiled when the Minister mentioned solidarity in the social insurance system. If one takes account of the large cash transfers that are taking place by way of tax relief on private pensions, there would not be too much solidarity to speak about. One must consider the wider picture.

With regard to PRSI, it came to my attention recently that certain streams of income are not subject to PRSI and certain anomalies exist. If a self-employed person has a rental income he or she must pay PRSI on it but if an employed person has rental income he or she does not have to pay PRSI. Is the Minister aware of this anomaly and does she intend to deal with it? It would make more sense to target those anomalies rather than hitting the Christmas bonus if she wanted to make savings in the social welfare system.

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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I am not aware of this specific issue and I will check it out.

Róisín Shortall (Dublin North West, Labour)
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Will the Minister examine the matter?

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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As I stated, I will check it out.

Arthur Morgan (Louth, Sinn Fein)
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What will be the implications for the Department's budget when the social insurance fund runs out?

Mary Hanafin (Dún Laoghaire, Fianna Fail)
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The important issue is that it will not have any implications for workers or anyone benefiting from claims made under the social insurance fund. When a deficit arises in the fund, as it inevitably will, the fund will be subvented by the Exchequer. Sufficient money will, therefore, be available to make pension and other payments which are currently paid from the fund. This year, the Department's budget is more than €21 billion. While I hope demand for jobseeker's allowance and other benefits will decrease next year, the Exchequer will top up the social insurance fund when it becomes necessary.