Joan Burton (Dublin West, Labour)
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380. To ask the Minister for Employment Affairs and Social Protection her plans for reforms to improve household incomes to ensure indexation of budget changes in welfare changes in future budgets; and if she will make a statement on the matter. [44788/17]

Regina Doherty (Meath East, Fine Gael)
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I was pleased to announce on Budget Day that the maximum rates of all primary weekly social welfare rates will increase by €5 per week from the end of March 2018, with proportionate increases for qualified adults and those on reduced rates of payment. This represents a 2.1% increase (at a minimum), and builds on a similar €5 weekly rate increase in Budget 2017, and a €3 increase in the weekly rates of pension payments in Budget 2016.

In recent year therefore social welfare rates have increased in excess of prices and increases in average earnings.

Any system of indexing welfare rates would have to take account of not just the need to preserve value but also whether this value should be preserved in relative terms (compared to incomes in the economy generally) or in purchasing value terms (indexed to prices).

In this regard the recently published Actuarial Review of the Social Insurance Fund considers the impact of indexation of the State Pension Contributory (SPC) on the Social Insurance Fund. It finds that indexation of SPC in line with the Consumer Price Index would be likely to result in projected expenditure of the Fund broadly equalling projected Fund receipts in the projection period (up to 2071). However it also finds that indexation of SPC in line with average earnings growth would be likely to result in a substantial and increasing shortfall in the Fund from 2020 onwards – amounting over time to over €400Bn.

These data indicate that the selection of an indexing approach could result in widely varying levels of payment dependent on the approach taken and also that the selection of an indexation approach would also have to have regard to the affordability and sustainability of the welfare system taking into account other demands on the public purse.

In addition any system of indexation would need to take account of the need to make structural changes from time to time in order to respond to emerging challenges and to improve equity within the system.

For these reasons the approach in Ireland has, until now, been to set welfare rates on an annual basis in the context of wider budgetary and economic policy.

Nevertheless I do believe that there may be merit in indexing rates as is done in some other countries and intend to consider the matter further in coming months.