State Pensions

HC Deb 05 June 1996 vol 278 cc458-9W

Ms Lynne

To ask the Secretary of State for Social Security what would be the gross annual cost of increasing the basic state pension by(a) £5, (b) £10 and (c) £20 a week; what would be (x) the annual savings in means-tested benefits and (y) increased Treasury receipts from income tax if the basic state pension was increased by (i) £5, (ii) £10 and (iii) £20 a week; and what increase in national insurance contributions would be needed to meet the net cost from increasing the basic state pension by (1) £5, (2) £10 and (3) £20 a week. [30165]

Mr. Heald

The information is in the tables:

Cost and benefit effects of increases to basic state pension 1996–97 prices
£ billion
	Gross cost to national insurance fund	Saving in income related benefits	Increase in treasury income tax receipts
Basic retirement pension increased by £5	2.7	0.7	0.2
Basic retirement pension increased by £10	5.4	1.5	0.5
Basic retirement pension increased by £20	10.8	2.9	1.1

1. Estimates of cost to the national insurance fund are supplied by the Government Actuary's department.

2. Calculations are based on increasing basic retirement pension only and assume that increases are applied to all recipients of any basic RP.

3. Savings in income-related benefits are calculated using the policy simulation model 1996–97, based on the family expenditure surveys 1991, 1992 and 1993.

4. Income tax effects have been calculated by the Inland Revenue using a projection of the 1994 family expenditure survey and are provisional.

5. All cost are rounded to the nearest £100 million, 1996£97 prices.

Effects of increasing basic state pension on class 1 national insurance contribution rates
		Percentage
	Employee main rate	Employer main rate
Current rates	10.0	10.2
Basic retirement pension increased by £5	10.8	10.7
Basic retirement pension increased by £10	11.6	11.3
Basic retirement pension increased by £20	13.4	12.4

1. Rates are rounded to the nearest 0.1 per cent.

2. The new contribution rates are derived by maintaining equity between the burden of extra contributions borne by the employee and the employer for an employee on average earnings.