Senator Gerard P. Craughwell - speech from 18 Jun 2019

Go raibhraibhgat, Cathaoirleach, Minister, you are very welcome to the House this afternoon. I am rather disappointed that the Minister for Social Protection is not here but I am sure that you will have an answer for that in your rebuttal. As you know, Minister, Class KPRSI for office holders was first introduced in 2011 as part of the Social Welfare and Pensions Act of 2010. For the first time, all office holders, including members of both houses of the Oireachtas, judges, the Attorney General, the President and City and County Councillors were required to pay a Class K PRSI, which is deducted at a rate of 4% from their salaries, but for which there is no entitlement to any social protection benefits. As soon as I was elected to the Shannad in 2014, I raised this issue on a regular basis and began work as a rapporteur on a report of the Joint Oireachtas Committee on Social Protection on Class K. However, having failed to progress the matter in the Houses, despite numerous debates and a rapporteur's report, I took a constitutional challenge to Class K in the High Court. My main concern was the impact of Class K on City and County Councillors, who have a small representational payment on which money are dependent and the additional deduction without benefit was excessively punitive. In anticipation of the outcome of the legal challenge, the then Minister for Social Protection, Leo Varadkar T. Dean, now Taoiseach, introduced an amendment to the Social Welfare Bill 2016 at committee stage to remove city and county councillors from the office holders category, and their PRSI class was changed to Class S. I continued with my legal challenge to Class K and was joined by a number of councillors. The case was settled, with all of the plaintiffs, myself included, being compensated, and the State accepting that Class K was wrong. In my contention, it is my contention now, that continued imposition of Class K PRSI on all other office holders, including members of the Oireachtas, is unconstitutional, as office holders are paying for a social welfare fund without any right to benefit from it. In essence, Class K PRSI is a tax on social service or on public service. While it was only fair that councillors who are on a paltry representational payment were removed from the category of office holders in the 2016 Act, all other office holders, including members of the Oireachtas, remained and have been Class K at 4% ever since. I only found out in recent days that I am still on Class K, having won a High Court action to remove me from Class K and put me on Class S. There are a number of problems with Class K, of which I am sure you are familiar with. The insurance benefits which accrue to a person paying Class K PRSI are nil. An elected senator, RTD, Terms and Conditions of Employment, do not carry any entitlements to illness benefits once they exceed the period of office. If an election is called and you lose your seat, you have no illness benefits. Worse still, having lost your seat and lost your illness benefit from the Oireachtas, you are not entitled to claim any illness benefits through your social protection contributions. You are not entitled to invalidity pension or any of the benefits that go with invalidity pension. As a member of the Oireachtas, I do have the facility where I may make voluntary PRSI contributions to keep a Class A stamp going. The price of a voluntary contribution for me, Minister, is €5,000 per year. €5,000 per year. Depending on the class of PRSI you were paying before you came here, it can be as low as €500. But in my case, and in the case of many of my colleagues, it would be €5,000. As a Class A contribution, you would be entitled to an old age pension. Now, Minister, many of your colleagues and mine, historically, have been elected for one term and one term only. And at the end of that term, being contributors at Class K has destroyed their social welfare or social protection record with the result that, in years to come, they will have a disruptive PRSI record. It is simply unacceptable. I will finish on this, Car Herrlough. Minister, the Taoiseach was wise when he was Minister for Social Protection. In the 2010 Act, he removed the line which said a member of a local authority, with the meaning of Local Government Act 2001, he removed that totally from the Social Welfare Act. And I believe that we should extend that to members of the Oireachtas. If we need to do something with respect to ensuring that members of the Oireachtas cannot benefit from a contributory old age pension, that is something that needs to be legislated for separately. Thank you, Minister. Before I call on the Minister to speak, I am sure that the members of the House would wish to join with me in welcoming a parliamentary delegation from Austria, led by Mr. Christian Hobart, Chair of the Austria-Ireland Friendship Group. On my own behalf, and on behalf of all my colleagues in Shannaday, I wish to extend a very warm welcome to you and good wishes for a successful visit to Ireland. You are very welcome. Thank you. That was a great day. I hope you enjoy being welcome. Thank you very much and welcome to work. I appreciate the peace of your share of your thoughts on both of your families and your friends. Thank you very much, Mr. Christian Hobart and both of you and your colleagues in Shannaday. Thank you. Thanks for having me, I am a four-year-old friend in Shannaday, thank you very much, for being with me and my wife. Thank you for being so pleased with you. I will not be, I hope you are a leader in the first half of your country. Thank you, I will not be one other way. I'm not sure what I'm saying to you. In 2011, public officeholders became liable to pay Class K PRSI of 4% on their officeholder income. Payment of the Class K PRSI charge does not establish any social insurance entitlements. Prior to 2011, this income was exempt from PRSI. Then, as now, social insurance entitlements are established and protected based on their non-officeholder activities or by paying voluntary contributions. This Class K charge was introduced for public officeholders because, unlike employees and the self-employed, they did not pay a 4% contribution on this income. With the abolition of the PRSI earnings ceilings for employees in 2011 and the introduction of a 3% U.S.C. charge on self-employed earnings over €100,000 also in 2011, this meant that public officeholders had a lower marginal rate of income tax, U.S.C. and PRSI as compared with other workers. As a measure of solidarity with those workers, the ORAC has voted to apply the 4% Class K on public officeholders. Public officeholders are now not the only group paying Class K. Since 2013, modified rate contributors, i.e. civil and public servants recruited prior to 1995, who also have earned an unearned income from self-employment, pay Class K PRSI on this previously exempt income. In 2014, Class K was applied to the previously exempt income of employees and occupational pensioners under 66 years, where they have unearned income only. These Class K charges yield nearly €40 million per annum for the Social Insurance Fund from over 88,000 contributors. Any proposal to remove the Class K charge for public officeholders who already benefit from generous exchequer-funded salaries and pension arrangements would inevitably lead to similar calls from other Class K contributors. This would have significant impact on the future health of the Social Insurance Fund. Senator Crocker. Thank you very much. Look, Minister, thank you very much for your contribution. The last paragraph is telling Minister, first and foremost, I will be exercising my right, following a High Court case, to be moved to Class S. That is the first point. This nonsense about generous exchequer-funded salaries and pensions. My pension minister, were I to lose my seat at the next election, is the princely sum of €8,000. And by the way, because I am a teacher, my pension, I am told, will be on the single pension scheme. So there is no generous pension that we are talking about. The problem that you have with other Class K contributors who have un-earned income, the likes of shareholders and people who have income from rental and the like, deal with it. Deal with it. I have no terms and conditions of employment, nor have any of my colleagues. We are officers of the state. And I assure you today, Minister, and I assure the department, that if they think I am going to sit down under this, they can think again. If I have to go back to the High Court, I will go back to the High Court. And by God, the next time I go back to the High Court, they will pay dearly for it, so they will. This is an outrageous statement made by the department. I appreciate, Minister, this is not your department. But it is outrageous. There are young people in here whose PRSI records are being destroyed. You talk about generous exchequer-funded pensions. A load of poppycock. We all know that the days of great pensions in the civil and public service, particularly for elected members, are long since gone. So if anybody thinks I am going to take this nonsense, they can think again. I will be back on this one. I am sorry for giving it to you between the eyes, because, Minister, I know you are the Minister for Education. You will be the man I will be coming back to when I do finish up here and half my teacher's pension is made up of my Class A PRSI, which you have broken. Not you, but the Oireachtas Class K has broken my Class A PRSI. I have no idea where my teacher's pension is going to end up as a result of this. So rock on. I am on the way back on this one. Well said, Senator Crockwell. Minister would you like to respond? Yes, absolutely. The education component, but at a general level. This has been an education even participating in this debate here this afternoon. Secondly, if there are any specific issues on the education related matters, I would be more than happy to facilitate a communication plan in that regard. Thirdly, like all matters to do with budgetary related items, there is a budget coming up quite shortly on the 8th of October, if I am correct, and certainly there will be a lot of deliberation and conversation going on as to where we are going in relation to that budget, but what I do know is there will be an approach to that budget in keeping with the challenging times that we have in terms of heightened expectation, lower growth and obviously Brexit issues looming as well. So, in the context of your specific issue around Class K, I am sure those conversations will be happening within the Department of Social Protection in advance of the budget as well. Thank you Minister. You