Flying kites while time bomb ticks


‘IN this world nothing can be said to be certain, except death and taxes.” So said the American founding father, Benjamin Franklin. Clearly he reckoned without the members of this Government.

With the Budget barely two months away we are seeing another absolute certainty in Irish political life: kite flying from Government ministers.

Despite protestations from the Taoiseach, Tanaiste and other ministers, we are daily witnessing kite after kite being launched by ministers determined to put their desire for easy headlines above the need for collective responsibility.

These kites have ranged across issues, from cutting the disability allowance for children under 18 to increases to PRSI to targeting pensioners to major cuts in child benefit.

No matter that hardly any of these kites stay afloat for more than a few days. No matter that this just causes unnecessary worry for many thousands of people. No matter that we saw the damage it caused last year — it still proceeds and we still hear the same hollow warnings from Gilmore and Kenny.

While their warnings would carry a lot more weight if they were backed up with actions, they would also have at least a shred of credibility if they were not in on the act themselves. Last Thursday the Tanaiste was blowing as much hot air as his lungs could generate into Brendan Howlin’s latest kite flying on public service allowances.

Having failed on September 19 to find more than one allowance that could be cancelled, we are now told that Howlin found more than 90 allowances. A 9,000 per cent improvement in only nine days. Perhaps someone had left them on a top shelf a week or two before.

The other big problem with all this kite flying is it distracts attention from issues deserving serious debate and scrutiny. The pension time bomb is just such an issue.

A recent report commissioned by the Government, but still unpublished, indicates the gap between future social welfare liabilities, of which pensions are a large part, and the revenue to fund them stands at a staggering €324bn.

We are living through the worst economic turbulence in the history of the State. The time was never less appropriate for people to make provision for themselves. Hundreds of thousands of people are living from day to day and cannot even imagine putting money aside for their future but, even if they did, where would they put it, in view of the number of privately run pension schemes which are technically insolvent?

About 772,000 people are enrolled in pension schemes in this country, half of whom are in the public sector. A further 200,000 self-employed people also have pensions. Given that there are two million people in the workforce, these are extremely worrying figures, especially as more than 80 per cent of private defined-benefit pension schemes, that is four out of every five, are technically insolvent.

This is a critical issue for every household, yet the response of the Government was to turn the screw even more. The net consequence is that several major companies are contemplating winding up their schemes.

A big problem for Irish defined-pension schemes is that the minimum funding standard requires them to have sufficient assets to purchase annuities even though they do not have to do so in practice. Despite this, the Government introduced legislation this year to require defined-benefit pension schemes to build an additional risk reserve of 15 per cent over the next 11 years. This was surely the worst possible time for such a measure, given most schemes cannot even address current liabilities.

An Irish Life survey showed that about half of those contributing to defined benefit pension schemes would either cease their contributions or sharply reduce them if the tax regime is changed.

The pension time clock is ticking more loudly and yet the response from Government gets quieter. It is precisely the type of issue that ministers should be clamouring to address. The indications, sadly, are that they will not.

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