Leo Varadkar: Private gains need not come at the price of public pain

There is much more scope for expanding social insurance. I have proposed merging the USC into PRSI as part of a wider tax cut and reform plan, writes Leo Varadkar.

FOR decades it has suited some vested interests to pit the public and private sectors against each other, stoking resentments in a divide-and-conquer strategy. Those working in the private sector are encouraged to be envious of the public sector. As a result, many in the public sector bristle against external attacks and misrepresentations. Neither side benefits, nor does the Irish economy.

The solution for some is to punish the public sector, removing its favourable terms and conditions. A much better approach is to amend our laws and give private sector employees greater security and more protections. This is equality upwards as opposed to the equality downwards so often favoured by the Left. It brings everyone to a higher level in a way that’s affordable and sustainable, as opposed to levelling everyone downwards through high taxes and restrictions.

The private sector accounts for almost three-quarters of the workforce, around 1.5 million men and women. The majority are employed by companies, large firms and SMEs, but many also work for NGOs, charities and not-for-profit organisations.

In many ways these employees are the labour market’s second-class citizens. While almost all public sector workers have an occupational pension, only 35% of private sector ones do, and this is getting worse. They can be laid off, earn less on average, and tend to do less well in terms of paid family leave, annual leave and sick pay.

This is, of course, a generalisation. Clerical officers in the public service are entitled to feel aggrieved. Recent recruits often complain about unequal pay scales and uncertain hours, while the private sector now offers better pay in areas like healthcare, ICT and senior management.

But taken in the round, the numbers do not lie. People working in the private sector have it harder.

Sometimes, commentators use this divide as a launching pad for an attack on the favourable terms and conditions in the public sector. I think this is the wrong approach.

The public service definitely needs more reform to become more efficient, modern and responsive to the needs of patients, passengers, students and service users. Public sector pensions need further reform to ensure that we can afford to continue paying good pensions to today’s public servants when they retire. But when it comes to many aspects of work, the public service actually has the balance right. That’s why I believe it’s time to amend our laws and afford private sector employees greater security and additional protections.

The single most important issue is private sector pensions, which falls under my remit as Minister for Social Protection. Some 65% of people working in the private sector have no occupational pension to top up their State pension. This needs to change. In some other countries, everyone is automatically enrolled into a Personal Future Savings Account. You can opt out of this, but wisely, most people don’t. Inherently, we all know it makes sense to save for the future, but human nature means we just keep putting it off.

So how does it work? It’s simple. You pay in, so does your employer, and the State tops it up in the form of tax relief. It’s your account so it can never be raided, and you can take it with you to a new job, or even bring it abroad. You get an annual statement and can track its growth online.

In some other countries this has taken up to ten years to put in place, because it’s a massive project and takes time to develop and bring through legislation, as well as the financial and IT systems. Individuals and companies need notice to factor it into business plans and pay demands. But in Ireland we can accelerate this timeline, and our scoping exercise has convinced me that if we are ambitious we can start it in 2021. To make this possible we will now embark on a consultation process with employers and trade unions and I look forward to gathering a wide range of opinions in the months ahead.

For older workers, it will give them a nest egg, for younger workers it will ensure that they have 30-40 years of savings built up for their retirement which will make a huge difference in their quality of life in their senior years. I am also considering allowing people to dip into their Future Funds for big life events like buying your first home or taking a career break to get a higher qualification, for example.

Separately, I am expanding the benefits we receive in return for paying PRSI. Paternity benefit was introduced last year. And from October, treatment benefit will be restored to include free or subsidised eyeglasses and a scale and polish from your dentist. There is much more scope for expanding social insurance. In other countries, it’s used to refund things like medical expenses. This, of course, has to be done in a prudent fashion that is affordable and sustainable. That’s why I have proposed merging the USC into PRSI as part of a wider tax-cut and reform plan.

ANOTHER important area is family leave or parental leave. We’ve already made a lot of progress with the second free pre-school year. Universal subsidies for childcare for children aged six months to three years kick in from September. Currently, my Department and the Department of Justice are working on proposals to provide for more parental leave that can be shared by couples. Family friendly employers find it easier to recruit and retain staff.

While there are costs to employers, there are also benefits. I also think we need to do more to incentivise employers to provide on-site childcare and changing facilities for people who cycle or run to work.

The Department of Jobs, Enterprise & Innovation is also developing new laws to respond to the problem of ‘if and when’ contracts. These often leave employees in the dark about how many hours they will have to work in any given week. This is a big agenda, but it’s an important one that we need to drive forward. In the modern economy, employees are any organisation’s greatest asset and should be seen as such. I want to ensure that Government, like employers, realises that too.

Leo Varadkar is Fine Gael TD for Dublin West and is Minister for Social Protection.