§ At this stage I want to deal with one matter which is not strictly speaking part of the Budget proper—social security benefits. I thought it helpful in the particular circumstances of last year to refer in the Budget Statement to our intentions for the year ahead, and I do so again this year for this reason.
§ In our Election Manifesto we promised to review retirement pensions every two years to ensure that they at least maintain their purchasing power. We have, in fact, done better than we promised. As the House knows, the Government recently decided that in future the main social security benefits will be up rated every year and that the next prating will be this autumn. This, of course, is something that pensioners have been asking for for years.
§ My right hon. Friend will be making a statement about this tomorrow. But, as the House found convenient last year, I will today give an outline of the Government's proposals.
§ Last autumn the retirement pension was increased by 20 per cent. This autumn—the first time for 20 years that there have been increases only a year apart—the pension will be increased by a further 12½ per cent. The standard pension for a married couple will, therefore, be increased by £1.20 from the present rate of £9.70 to £10.90. The standard rate for a single person will be increased by 75p, from £6 to £6.75. Other national insurance benefits and war pensions will be correspondingly improved. The basic scale rates of supplementary benefit will go up by the same cash amounts as pensions.
1356§ This means that in cash terms pensions and benefits will have been raised by about one-third above the level at which they stood before last year's increase. The two increases together, in conjunction with the assurance of an increase every year in future, will go further to improve the position of pensioners than any previous measures in the history of national insurance.
§ The cost of the improvements in national insurance benefits is estimated at nearly £400 million in a full year. This, of course, leads me to the consequent increase in contributions.
§ Once again we have concluded that the fairest way of financing the increase is by moving towards the long-term contributions structure described in the While Paper "Strategy for Pensions". This year, however, we intend to go further in this direction than last year by transferring some of the burden from employees to employers. Accordingly, the employers' flat-rate contributions will go up by 10p for men.
§ The earnings ceiling for graduated contributions will be raised from £42 to £48 a week. Only a relatively small proportion of the total cost will then need to be found in other ways. We have decided to meet it by an increase in the rate of graduated contributions on earnings between £18 and £48 a week; these will go up from 4.35 to 4.75 per cent. for employers and employees alike. The ordinary flat-rate contribution by employees will remain unchanged, although there will, of course, be flat-rate increases for the self-employed and non-employed.
§ The Exchequer will, as in the past, contribute about 18 per cent. of the total contribution income.
§ The pre-Budget forecasts, to which I have referred, took into account the increases in both pensions and contributions.
§ There is one taxation aspect I must mention. Because the Inland Revenue is so heavily committed to work in preparation for the unification of personal taxation, and it cannot this year undertake any extra P.A.Y.E. recoding work, the increase in national insurance pensions and war widows' pensions payable in 1972–73—and I had better stress only the increase, and only in 1972–73—will be tax-free.