Martin Mansergh (Fianna Fail)

I welcome the Minister and his officials and I also welcome the debate. Notwithstanding the statistics that have been cited, we can be quite proud of what we have done in Government over the past 20 or 30 years to improve pensions. In the late 1970s and early 1980s there were significant disproportionate increases in pensions and since 1997 there has again been a policy of detaching pensions from other social welfare benefits.

It also needs to be borne in mind that a wide array of free schemes are not reflected in the comparative statistics while generous tax exemptions are provided, which have been steadily increased. However, I fully agree that even €200 a week is tight for anyone to live on. There is an underlying recognition that the State can only do so much directly and people need to be encouraged to make other provisions for themselves.

This is a major economic problem in many European countries. When I lived in Germany in the mid-1970s, the administrators saw the pension problem looming but did not quite know what to do about it. That is probably still the case. Ireland is fortunate in having a better demographic profile and we have an opportunity to make decisions before we are under pressure. There are so many demographic uncertainties that it is hard to say what precise pressure we will be under. The social costs are crippling the French and German economies in many ways. We must be careful in our desire to improve the position that we do not land ourselves in a situation from which others are trying painfully and without much success to extricate themselves.

The Minister raised a few questions at the end of his contribution. He referred to whether there should be mandatory private schemes. I would be inclined to be cautious about going that far. Every encouragement should be given but, once such schemes become mandatory, they will add to the fixed costs of an employer. Many employers are in a position to respond to an enlightened policy but, equally, others operate at the margin of profitability.

The ESRI raised the equity question in terms of whether pension payments should be deductible at the 42% tax rate. I was a supporter of providing for mortgage interest and VHI relief at the standard rate. I would be more cautious about doing this for pensions because of the effect it could have on the pensions industry. It also comes down to the philosophical question of whether one is levelling down or levelling up.