Stephen Donnelly (Wicklow, Independent)
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35. To ask the Minister for Jobs, Enterprise and Innovation his views on whether the lower social protections offered to self-employed persons are acting as a deterrent to entrepreneurship here, and, if so, the steps that should be taken to address the issue. [39079/14]

Richard Bruton (Dublin North Central, Fine Gael)
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The issue of social protection cover for the self-employed and entrepreneurs has been raised with my Department and the Department of Social Protection in the context of the public consultation on the recently published National Policy Statement on Entrepreneurship and indeed the wider Action Plan for Jobs process. The Report of the Entrepreneurship forum, which led to the new National Policy Statement also considered a number of social protection issues, including this one, and recognised the complex nature of the factors involved in making changes in this area.

In September 2013, the Tánaiste published the report of the Advisory Group on Tax and Social Welfare on Extending Social Insurance Coverage for the self-employed. The Group was asked to examine and report on issues involved in extending social insurance coverage for self-employed people in order to establish whether or not such cover is technically feasible and financially sustainable. Self-employed persons are liable for PRSI at the class S rate of 4%.

The Group found that the current system of means tested jobseeker’s allowance payments provides adequate cover to self-employed people for the risks associated with unemployment. Consequently, the Group was not convinced that there was a need for the extension of social insurance for the self-employed to provide cover for jobseeker’s benefit.

The Group found that extending social insurance for the self-employed was warranted in cases related to long term sickness or injuries. To this end, the Group recommended that class S benefits should be extended to provide cover for people who are permanently incapable of work, because of a long-term illness or incapacity, through the invalidity pension and the partial capacity benefit schemes. The Group further recommended that the extension of social insurance in this regard should be on a compulsory basis and that the rate of contribution for class S should be increased by at least 1.5 percentage points.

There are positive and negative implications for job-creation and entrepreneurship of increasing the self-employed PRSI rate by 1.5% to fund the extension of Invalidity Pension entitlement to the self-employed on a revenue neutral basis. On the positive side, entrepreneurs would be provided with an additional safety net. On the negative side, higher marginal personal tax rates can act as a disincentive towards Job Creation and Entrepreneurship.

This recommendation will require further consideration in conjunction with the findings of the most recent Actuarial Review of the Social Insurance Fund which indicated that the self-employed achieve better value for money compared to the employed when the comparison includes both employer and employee contributions in respect of the employed person.

My colleagues in Government and I will reflect on the findings of the Advisory Group on this issue and will further consider the recommendations contained in the report. This discussion will feed into the Action Plan for Jobs process, which underpins the importance of fostering an environment that supports entrepreneurial activities and assists small businesses to expand, create jobs and contribute to national economic growth.