State borrows to pay dole as fund runs dry for first time since 1997
THE government fund from which social welfare payments are taken has run dry for the first time in 13 years.
During the Celtic Tiger era a record €3.38bn surplus was built up in the Social Insurance Fund (SIF) -- but it ran out last month.
The Irish Independent has learned that on May 28 it went into deficit for the first time since 1997.
On that day the Government began pumping in some of the €1.55bn of borrowed money which will be needed for the remainder of the year, in order to ensure that people continue to get social welfare payments.
It is not expected to go back into the black until 2012.
The money was handed over the same day it was announced that special social welfare payments to lone parents would be stopped once their child reaches 13.
Last night the opposition slammed the failure by the Government to plug the gap caused by growing unemployment. They warned that the national debt will continue to spiral and future generations will be crippled with repaying today's debt.
Figures obtained by the Irish Independent show there was a net balance of €25.04m in the fund on May 31 -- but this was after €180m was added in by the Exchequer. The total paid into the SIF is expected to reach €1.5bn by the end of the year.
The most recent figures show that in April, €590.6m was paid into the fund in PRSI contributions -- but €776.4m was paid out, a difference of €185.8m.
A surplus was previously built up when there was near record-employment with all PRSI payments going into the fund.
Figures show there was a record €3.38bn in the fund in 2008, but in March just €934m remained.
However, the downturn in the economy and the significant number of job losses means that the amount being paid out is much greater than the trickle going in.
As the surplus is now exhausted, it has fallen into deficit. The €1.5bn being borrowed to shore up the fund is significantly higher than the €1.17bn estimated in December's Budget. The cash-strapped Exchequer will have to borrow a minimum of €7bn to make up the fund's shortfall between now and the end of 2012 so people can continue to receive benefits.
However, if the number of unemployed grows, the Government will be forced to borrow for many more years.
The problem is further compounded by false welfare claims. In one example, 9,200 people who sought welfare last year were subsequently deemed not to be permanent residents in the country.
PRSI receipts first began to fall in 2008 and the amount paid in was less than that being paid out this year, with a shortfall of €416m being recorded.
In 2009 an average of €598m was received in PRSI payments each month -- but €812m was paid out monthly in social welfare payments.
Last night, Labour's finance spokeswoman Joan Burton argued that there was no point in the Government making small cuts such as those affecting lone parents when the banks were being given billions.
"We'll be paying for this for years to come," added Ms Burton.