THE SOCIAL Insurance Fund will run out by the end of this year due to rising unemployment, an Oireachtas Committee has been told.
The fund, into which every worker pays PRSI, is used to pay unemployment benefit, State pensions, maternity benefit and redundancy and insolvency payments.
At the end of last year, the fund had a surplus of €3.4 billion, but that is likely to run out by the end of this year or the start of 2010, according to the secretary general of the Department of Social and Family Affairs.
Bernadette Lacey told the Public Accounts Committee (PAC) that “next year we will definitely be in deficit. There won’t be anything left in the fund to carry over from this year.
“The rate of increase on the live register and the drop in the contribution has been such that we had not anticipated and we are still trying to assess it. We’re working on the figures as we go along.”
Responding to the prospect of a deficit in the social insurance fund, Labour TD Róisín Shortall, a member of the PAC, said that it was a “very dire situation”.
Fellow Labour TD Tommy Broughan said a recent study by Mercers had suggested that the fund surplus would not run out until 2016, but it was now running out seven years early. He suggested the fund was in a “very serious crisis”.
“There may be a need for an exchequer subvention or an examination of how the income for the fund is achieved,” Ms Lacey replied.
The department later said that the €3.4 billion will be sufficient to meet all payments from the fund this year.
Speaking later, Minister for Social and Family Affairs Mary Hanafin said: “We do anticipate that by the middle of next year there will be a gap between what we are spending on pensions and benefits such as maternity, optical and treatments and what is coming in from workers, but the exchequer will make up that gap.
“The State by law has to make up any difference that there is between the income and expenditure and of course that is going to put a pressure on the exchequer and on more taxpayers’ money but obviously in the context of the forthcoming budget.”
The fund, which was set up in 1952, was in surplus throughout the years of the Celtic Tiger from 1997 until last year, when it recorded a €230 million deficit. According to figures produced yesterday, it ran a surplus of €649 million in 2006 and €583 million in 2007.
Fred Foster, a principal officer in the Department of Finance, said the issue was being looked at in the next context of the forthcoming supplementary budget on April 7th.
“Until the 8th of April, I feel constrained in indicating what the parameters will be,” he said.
He said the deficit for this year would be €2 billion based on a ballpark unemployment figure of between 340,000 and 350,000, but those figures escalated in the first quarter of the year.
Based on present unemployment figures, the fund would still have more than €1 billion in it to carry over for next year, but that depends on PRSI receipts and the levels of unemployment for the rest of the year.
Most employers and employees make compulsory payments to the Social Insurance Fund.