Is the NI Fund a buffer for when the economy takes a downturn? That was the issue posed this week in Tynwald as the purpose of the National Insurance Fund was questioned.
David Ashford was quizzed on the purpose of the fund and what reviews have been undertaken into it by Douglas Central MHK Chris Thomas.
In his reply, Mr Ashford outlined that the NI fund exists to pay benefits and pensions as well as associated admin costs.
He said: ‘In addition, following Tynwald approval, the Fund was used to support the island during the pandemic, with the Salary Support Scheme and MERA benefit being paid from the Fund.’ The Minister also confirmed that a review by PwC will be completed by the time of the 2023 Budget.
Buffer The Fluctuation Slayer
In his supplementary questions, Mr Thomas referred back to a written answer provided by Mr Ashford when Mr Thomas asked him what the opportunity cost of the National Insurance Holiday Scheme is for the National Insurance Fund; what the unfunded actuarial liability is; and how he assesses the scheme’s value for money?
In that response, Mr Ashford said: ‘No actuarial valuation of this specific liability (to pay contributory benefits) in the future is possible. The Manx National Insurance Scheme operates on a pay as you go basis with the fund operating as a buffer for fluctuations in the economy.’
Mr Thomas asked if what was meant by this answer, or whether it was just ‘loose use of English’?
The Treasury Minister said that in relation to his ‘buffer’ comment, the fund it ‘used to actually pay out benefits, so it gives security around the future cost of benefits and obviously one of the issues, as the economy changes, is Government revenue may change, whereas the Fund actually gives us certainty around where the benefit costs are coming from’.
In effect confirming yes it is used as a buffer for fluctuations in the economy.
I Completely Disagree
Mr Thomas later took members for a history lesson when he asked of the changes made to the pension age by former Treasury minister Eddie Teare, supported by Bill Henderson MLC and retired minister Chris Robertshaw, that people had to work until 67 ‘because the fund was running out by 2047’.
He added: ‘Does the Treasury Minister agree with me that the messages are getting a bit mixed because seven years ago we were told that the Fund was running out and now we are told it can be used, to hundreds of millions of pounds’ extent, to support current fluctuations in the economy?’
Unsurprisingly, Mr Ashford said he ‘completely disagrees’ with Mr Thomas’ summary of events and said that is ‘not what is being said at all’.
He added: ‘It is not being said that the National Insurance Fund can be used to support hundreds of millions of pounds. This Hon. Court, if he is referring to the pandemic support schemes, took the view at the time that it was the right place for those schemes to be funded from.
‘The schemes supported people during what was a pretty unprecedented time, Mr President. In fact, you have got to go back 100 years to find something similar. It was the right decision then, I believe it is still the right decision now. The National Insurance Fund is not a buffer in the way the Hon. Member is portraying it. It is there to ensure that we have sufficient funds to honour the commitments in relation to benefits that need to be paid, which if we did not have that Fund would have to come out of general revenue. So that is the reason for the National Insurance Fund.’