David Stanton (Cork East, Fine Gael)
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Question 250: To ask the Minister for Finance, further to Question No. 200 of 17 November 2004, the reason the annual surplus on the social insurance fund fell from €631 million in 2001 to €422 million in 2002 and to €255 million in 2003; and if he will make a statement on the matter. [30318/04]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The extent to which the annual income of the social insurance fund is not required to meet benefit payments and administration costs in that year represents the annual surplus of the fund. The annual income and expenditure on the social insurance fund in the period from 2001 to 2003 is set out in the following table.

Over the period, the annual increases in expenditure exceeded the increase in income, hence the decline in the level of the annual surplus. Several factors gave rise to this situation.

Apart from changes in the level of insurable employment and earnings, several alterations in the rates and structure of PRSI occurred over this period. In December 2000, there was a 0.7% reduction in the employer rate of PRSI. In April 2001, employee PRSI rates were reduced by0.5%. The employer and self-employed contribution ceiling were also abolished that year. In March 2002, there was a further reduction of 1.25% in the highest employer PRSI rate. All these changes, given the timing of their implementation, would have a part-year impact in their first year and a full year impact in subsequent years on the fund's income.

The cost of the annual social welfare budget packages gave rise to year on year increases in expenditure. As with income above, there will also be relevant timing factors. The 2002 and 2003 budget increases were applied with effect from January and accordingly, the full year impact is set out in those years. However, the 2001 budget increases came into effect in April of that year and accordingly, the 2001 financial year contained only a part year cost of those increases. The full year cost of the 2001 budget rates increases were not fully reflected until the following 2002 financial year. In addition, there was an increase in the number of people claiming benefits over the period. For example, those recipients claiming unemployment benefit increased over the period in question from around 59,900 in 2001 to 70,100 in 2003, and there was also an increasing number of people entitled to a contributory social welfare pension, invalidity pension and disability benefit.