29. All contributory social insurance claims are paid out of the social insurance fund (the Fund). The Social Welfare Act, 1952 created the Fund as it is currently constituted. The 1952 Act created a unified fund where previously there had been a number of different funds with different controlling bodies. Significantly, the 1952 Act provided that the Fund be administered by the Minister for Social Welfare. The statutory basis for the Fund at present is contained at Sections 6, 7 and 8 of the Social Welfare (Consolidation) Act, 1993. The Fund is made up of the contributions of employees (now including self-employed people), employers and the State Exchequer. Unlike the contributions of the first two parties which are fixed by law, the State's contribution is a "residual" one designed to make up whatever shortfall may arise between the Fund's income and outgoings. The State contribution has varied considerably over time. For example, in 1965 the State contribution amounted to 39.9%; in 1985 it amounted to 28.8 % and by 1995 it had dropped to less than 2 per cent. [Source: Report of the Expert Working Group on the Integration of the Tax and Social Welfare Systems (1996) P.84]. The following description of the operation of the Fund is from Social Insurance In Ireland, a discussion document designed to promote "a full public debate on the form of Social Insurance we wish to have in future" and published by the Department in October 1996:
"The Social Insurance Fund comprises a current account and an investment account. The Minister for Social Welfare manages and controls the current account of the Fund and the Minister for Finance manages and controls the investment account of the Fund. Social Insurance contributions are paid into the current account and pension payments and other Social Insurance based benefits are paid from the
current account. In the event of there being a surplus in the currentaccount which is not required to meet Fund liabilities such as pensionpayments, the surplus is transferred to the investment account and invested by the Minister for Finance. The income arising from these investments (and in due course, the capital) is returned to the Social Insurance Fund. These arrangements are provided for in legislation". (P.9)
30. The Department's discussion document highlights in particular the "contributory principle" which underlies social insurance and which differentiates it from other forms of social security:
"Social Insurance provides certainty based on statutory entitlements built up through contributions made during working life. This is most clearly apparent in the case of Retirement, Old Age and Widow's and Widower's Pensions. The Social Insurance contributor knows that the prescribed amounts will be paid when the contingency in questionarises, that no means test or other such factor enters the picture and has a reasonable expectation that rates of payment will be regularly updated into the future" (P. 21)
31. The discussion document (P.24 - 26) deals with the much debated issue of whether social insurance is simply another form of taxation or whether it belongs more properly to the category of insurance. The Department sides with the 1986 view of the Commission on Social Welfare - and rejects the conclusion of the earlier (1982) Commission on Taxation - that social insurance has a significant insurance dimension. The Report of the Commission on Social Welfare, at P.30, quoted with approval Marshall's definition of social insurance which explicitly recognises a contractual dimension with the role of the state being that of guarantor of the
performance of the social insurance fund. The conclusion reached by the Department in the discussion document is as follows:
"A number of factors combine to make the Social Insurance system more akin to commercial insurance than to taxation. The 'contributory principle' is, of course, a key feature of commercial insurance. Also, both Social Insurance and commercial insurance operate on the basis of pooling of risk across the contributors. Contributions are made by all participants in accordance with prescribed conditions and risks to individual participants arising from defined contingencies are reduced as benefits are paid out in accordance with prescribed conditions. The Social Insurance system is not insurance in the fully commercial or actuarial sense, but it does confer an individual entitlement to particular benefits, something which is not a feature of the tax system". (P.26)
32. The Department's discussion document stresses the distinctive nature of social insurance and the predictability and reliability of its schemes which involve entitlement based on contributions paid. In its general tenor, the document appears to support the popular perception that, provided the relevant contributions have been paid and that the particular risk materialises, the Fund will meet its obligation to the insured worker. Not surprisingly, the document does not go into the detailed workings of the various social insurance payments nor does it deal with the loss of entitlement consequent on a late claim. But it does appear to support the understanding that the Fund will deal fairly and reasonably with its contributing members.