Minister defends PRSI backtrack

FINANCE Minister Brian Cowen has defended his decision to renege on election promises and leave the current PRSI system intact.

Yesterday he said he still intends to reform the public insurance system despite leaving it largely untouched in this year’s budget and opting not to abolish the ceiling where payments are cut off.

He said PRSI reform was still part of his five-year plan.

“We need to have a progressive approach to the PRSI system,” he said.

On May 2 he kicked off his finance election manifesto by saying PRSI was high on his agenda and represented the “last great injustice in our taxation system”.

“It is currently structured as a regressive tax as it is borne heavily by those on low and middle incomes. We will make it a fair tax. In contrast Fine Gael and Labour have nothing to say about PRSI,” he said at the time.

Previously, at the Fianna Fáil Árd Fheis, the party said it would scrap the PRSI ceiling, so people would pay contributions on every cent they earn rather than the first €50,700 — which will be the rate next year.

He had also pledged to cut the rate of PRSI from 4% to 2% to ease the burden on low-income earners.

However, last Wednesday he did not do either and made less change to the system than the modest alterations announced in his budget speech 12 months previously.

Fine Gael finance spokesman Richard Bruton said it was typical of an economic policy which avoided big decisions.

“Before the election he listed all his tax priorities and what he was going to bring in, but now the only thing he has changed is the one thing he said he was not going to do and that is stamp duty. It is difficult to understand what his motivations were. He could have reduced the PRSI rate while raising the ceiling and it could have been done without any revenue impact,” Mr Bruton said.

Reform of PRSI was also a key feature in the Green Party manifesto and yesterday its finance spokesman, Senator Dan Boyle, said the plan remained part of the Programme for Government: “I think the logic has to be that when there is only some money to play around with you cannot do everything at once. But we are committed to having everything we agreed in the Programme for Government implemented.”