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PRSI August 28, 2012

Posted by WorldbyStorm in Economy, Irish Politics, The Left.

Interesting report in the Sunday Business Post at the weekend about a division at the heart of the government.

Another coalition row is brewing over Budget 2013, this time over PRSI increases sought by Social Protection Minister Joan Burton to deal with the Social Insurance Fund’s looming €2.2 billion deficit by 2016.
Fine Gael minister of state Brian Hayes hit out last week at Burton’s proposal to increase PRSI, suggesting instead that shortfalls should be addressed by “general reductions” in welfare payments.

The SBP notes that this is central to the approach of Fine Gael. According to an unnamed FG source:

“But the question is how ordinary voters would view PRSI hikes – the chances are they would be see it as a tax on take-home pay,” said the source.
The divide goes beyond semantics to the recurring clash between Fine Gael as a party of low taxes and Labour’s European model of a social insurance system to support specific benefits, such as state pensions, maternity leave, sick leave pay and unemployment benefits.

Well, there’s that I guess, though in terms of the current leadership of the LP that distinction seems to be more notional than actual and all too often where there is political distinctiveness it seems to be more borne of necessity to shepherd political constituencies that will support the LP electorally than of ingrained principle.

I’d also add that one major problem is that by pushing almost entirely to process led approaches the LP is – almost as ever – conceding ground to the right of centre. If the argument is (in part) efficiency of running the system why gift power to the less enthusiastic formation rather than the one which is full bloodedly engaged with said system?

But it goes further to be honest. It goes to an attitude in Fine Gael that sees any increase in monies from citizens as all but anathema (well bar one or two obvious exceptions). What’s curious about this is that in the general discourse, and this article is no exception there either, the troika is used as a touchstone for certain policy approaches. Consider the following:

The troika, meanwhile, has raised questions about universal payments, such as child benefit and pensioners’ benefits including free electricity and TV licence and free travel.

Of such cloth is an orthodoxy constructed.

And while it is true that the troika has raised questions about universality – nice work for a crew to be found IIRC hanging out in the Merrion Hotel, the troika has also said that within the parameters of the agreed financial sums the government is pretty much able to arrange matters as it sees fit whether tilted towards tax increases or expenditure cuts.

Of course there is a philosophical problem here. Well, not so much philosophical as an issue of categorisation.

However, PricewaterhouseCoooper’s head of taxation Feargal O’Rourke said it was wrong to view the fund as the key source of welfare payments that must be considered in isolation from the general government coffers.

“The broader discussion is around what is the appropriate level of welfare that we can afford as a cost and it is not the case that welfare is met only from the Social Insurance Fund,” he said.
“I don’t think that this is a separate and sacrosanct fund that cannot be supplemented if what goes in is not enough. It’s an academic discussion since more people view PRSI as a tax and not an insurance fund,” he believes.

But the important word in that last quote is ‘view’. That’s simply a perception, albeit one based on the fairly partial nature of PRSI. That’s a significant problem because it means that the perceptual linkage between payments in/payments out is broken and subsumed into the corrosively Manichaean discourse around taxation. This cedes yet further ground to the right both politically and rhetorically.

Yet it is also a function of the diminished state of the LP where it seems unable in general terms – though in fairness one could make the case that Burton is arguing it sotto voce – to make the case for social insurance as social insurance.

In all this debate the old line about ‘you don’t want to be poor… or sick… or… etc’ [I paraphrase] comes to mind when reading O’Rourkes comment about ‘the appropriate level of welfare we can afford as a cost’.

Meanwhile we are treated to the following:

But some of her colleagues in the Department of Finance believe that Burton needs to apply the scalpel more efficiently to cut welfare payments that are often lower in other EU countries.

As noted at the weekend, even Marc Coleman doesn’t agree with that line (though he’s using that small fact as a means of hammering the Croke Park Agreement).


1. Pidge - August 28, 2012

What’s the reasoning behind having separate charges like PRSI and USC, instead of just keeping them all in income tax? Seems like a recipe for greater complexity.


2. PQ - August 28, 2012

Certain welfare payments come out of the social insurance fund and you are only entitled to them if you have enough insurance contributions. The biggest one being the contributory state pension.

Also employers pay part of the PRSI. I guess you could integrate USC/PRSI/income tax (like Denmark) and then have employers make a separate contribution for each employee.

But would you trust the government to then universalise the welfare system?

Likely they would just means test everyone…


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