THE COALITION row over PRSI contributions reignited yesterday as a Fine Gael Minister suggested cutting social welfare rates would be better than raising taxes in the budget.
Minister of State for Finance Brian Hayes became the latest senior politician to voice objections to Labour Minister for Social Protection Joan Burton’s plan to increase PRSI.
“A general reduction in social welfare might well be the way to go,” Mr Hayes said.
An actuarial review to be presented to Government is expected to warn that the social insurance fund that provides for social welfare payments will face a significant shortfall.
Ms Burton favours plugging the fund’s shortfall by increasing PRSI contributions, a stance which has previously resulted in a public clash with Fine Gael Minister for Jobs and Enterprise Richard Bruton.
Mr Hayes yesterday said Ms Burton was correct to highlight the deficit in the fund but insisted increasing taxation rates was not the best way to fix the problem.
“Joan Burton is right to highlight the fact that there is a significant deficit in the social insurance fund which was established in the 1950s,” he said. “She rightly points out we have got to fix that problem. It does not necessarily follow that a rise in taxes is the solution.”
He said his view was that the focus should be on the expenditure side, and a general reduction in social welfare spending might be a more appropriate response.
Mr Hayes said the Cabinet would look at the actuarial report when it was produced but stressed the overall priority for the Government must be to reduce the tax burden as far as possible.
“If we tax the hell out of people, it’s a disincentive to work,” he said.
Mr Hayes conceded the Government would face “a very difficult balancing act” as it approached work on December’s budget.
“If the priority is to get people back to work and keep those who are in work in their jobs, you don’t achieve that by ratcheting up tax,” he said.
In a recent interview with The Irish Times, Ms Burton warned cutting social welfare rates in the budget might hinder rather than help the State’s economic recovery.
Taoiseach Enda Kenny said Budget 2013 would be “the most challenging of the lifetime of this Government”. There were no “personal ministerial decisions” about the budget, he added.
