Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I did not think I would have as much time, but I will probably not have to use it all.

I welcome the broad support for the Bill from the House. Senators have welcomed most, if not all, of the measures. They have asked why other things were not included. The nature of budgets, as everyone understands, is that they are always limited. Every line Minister always seeks more things than he or she gets and has to make choices in terms of his or her priorities.

A number of Senators raised issues relating to tax, public sector pension rules, broader fiscal policy issues, budgetary matters, private pension schemes, medical cards and councillors' pay. These are all very important issues but in the time I have available, I propose to reply to the matters that are directly relevant to the Bill.

Senator Ardagh and a number of other Senators mentioned the ongoing issues in regard to how we calculate the contributory State pension which, of course, is very complicated and far from perfect. Some Senators, including Senator Kieran O'Donnell, referred to the fact that we now require people to have made 250 contributions during the course of their working life in order to qualify for a State contributory pension. That means that to qualify for a State contributory pension, a person has to work for roughly ten years out of a typical working life of 40 to 50 years. I do not think that is terribly unreasonable, quite frankly. That could, of course, be changed.

If one is a public servant, one can qualify for a public service pension after two years but one receives two fortieths; if one is in a job for ten years one will receive ten fortieths. We could do something like that and allow people who have contributed for nine years to receive nine fortieths of a State contributory pension. That is how private sector pensions work. The amount involved would not be an awful lot - it would be in the region of €20 or €30 a week. All of these things are possible, but one has to bear the consequences in mind.

Some mentioned the issues around averaging and banding. It does happen that people pay PRSI contributions for a number of years, are absent from the workforce for a long period of time for many reasons, mainly, but not always, home caring, return to work for a period of time and have their contributions averaged out over the entire period. They end up being worse off than somebody who did not work at all until the past ten years of his or her life. We hope to change that through a move towards what is called a total contributions approach. We will assess pensions based not on when one made one's contributions, but rather the total number of contributions one has made throughout the course of one's working life.

I would counsel that, as is always the case with any significant change in the way rules work when one calculates pensions, there will be winners and losers. As politicians, we find it is always the losers rather than the winners who come in to our offices, and Members should bear that in mind. Anything that results in a net increase in overall costs every year in terms of State pensions has a cost. My Department has calculated, for example, that if we backdated the homemakers scheme to pre-1994, something many people would like to do, it would cost €290 million a year. The way the State pension and PRSI fund works is that PRSI is paid into the fund and out of that comes the State contributory pension, maternity benefit, sick pay and all of the rest. If one plans to spend another €290 million a year, who will pay for it? It will be the ordinary workers and employers that pay PRSI. The net effect of the change would mean that today's working mothers and fathers would pay higher PRSI in order to pay for people who will retire in the next couple of years.

One also has to bear in mind that anything that may apply retrospectively to people who have already retired can have consequences. At the moment, people are coming to our clinics who are not in receipt of the State contributory pension to which they thought they might be entitled. If one changes the rules retrospectively and starts recalculating the pensions of people who have already retired, one will also have winners and losers. People in their 70s and 80s will come to us wanting to know why their pensions have been reduced. Let us tread carefully when it comes to any changes in this space and understand what the impact will be, who the winners and losers will be, what their profile would be, what the potential costs would be and how that might increase the contributions of existing workers who are already struggling to pay bills and do not need any new charges.

I hope that before the end of the first quarter next year, my Department will put before the joint committee a very detailed report on the options for reform of the way we calculate the State contributory pension, the options for change, the winners and losers, the numbers of winners and losers in each case, the costs and all of the consequences. We can then have a reasoned and well-informed debate on the changes. Senators should not think for a second that any significant change will not result in increased PRSI contributions for existing workers and employers or involve winners and losers. Things just do not work that way and the figures do not add up. Any reform in this area needs to be carefully considered.

In terms of how we calculate social insurance benefits, there are lots of gender gaps. An actuarial analysis carried out independently in 2012 indicated that, on balance, women benefit more than men from the social insurance system, based on the fact that women tend to live longer and, therefore, gain more from the pension system.It is great that women live longer. For many different reasons, they also tend to pay less into the Social Insurance Fund while they are working. Historically, maternity arrangements have also been much better than paternity arrangements. It is important to place these facts on record in the spirit of equality. They are not opinions but the findings of an actuarial analysis published in 2012, which Senators are welcome to read. I have no doubt some will dispute the findings because many facts are also opinions and that works both ways too.

To respond to the points raised by Senator Victor Boyhan, the Bill proposes to reverse some of the cuts made by a Government of which I was a member. While the Senator was correct and made a fair point in this regard, it is also true that I was a member of a Government, with the Labour Party, which saved the country from national bankruptcy, put the public finances in order again and halved unemployment. The Senator's comments would have been fairer if he had also acknowledged those facts.

A couple of speakers referred to the restoration of the telephone allowance. The cost of fully restoring the telephone allowance would be €110 million per annum, while the cost of restoring it to its 2012 level would be €40 million. People who ask me to restore the telephone allowance often believe it is a minor payment but that it is not the case. The reason people found it so important was that it was valuable and, as a result, expensive for taxpayers. We considered this option in the budget but we would not have been able to introduce a €5 increase in the pension and restore the telephone allowance at the same time. We will need to have a significant amount of fiscal space next year if we are to be able to do both next year. We will have to make a decision to either increase weekly rates or deal with other matters. This year, I concentrated on the weekly rates rather than other matters. However, there is no reason we could not address these other matters in a future budget, provided we leave weekly rates. It is difficult to do both with the resources at our disposal. Every additional week for which fuel allowance is paid costs €9 million. I note that the maximum rate of the weekly State pension has increased by €8 in recent years. When the financial crisis started the telephone allowance was worth approximately €20 per month.

The change to class K PRSI contributions for councillors will be introduced by ministerial order. I intend to sign the order in the first week of January, unless something goes wrong. I was asked whether councillors would be refunded class K contributions paid in the past. They will not be refunded. No one else will have pay cuts or universal social charge payments refunded and, as such, we could not make a special exception for councillors by having cuts they experienced refunded.