§ Mr. O'HaraTo 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 per week; what would be (i) the annual savings in means-tested benefits and (ii) increased Treasury receipts from income tax if the basic state pension was increased by (1) £5 per week, (2) £10 per week, (3) £20 per week; and what increase in national insurance contributions would be needed to meet the net cost of increasing the basic state pension by (A) £5 per week, (B) £10 per week, and (C) £20 per week. [24807]

§ Mr. DenhamThe information requested is set out in the tables.

The additional costs of increasing basic state pension in 1998–99 by £5, £10 and £20 if contributory retirement pension (RP)

only increased

1998–99 £5 increase £10 increase £20 increase Gross cost (£ million) 2,380 4,750 9,510 Income-related benefit offset (£ million) -630 -1,210 -2,220 Income tax offset (£ million) -190 -400 -830 National Insurance effects The Lower Earnings Limit would be increased to £69 £74 £84 The Upper Earnings Limited would be increased to £520 £560 £635 To offset the increase in net costs: The employees' NIC rate would have to be increased by 0.4 percentage points 0.9 percentage points 1.9 percentage points The employers' NIC rate would have to be increased by 0.2 percentage points 0.5 percentage points 1.1 percentage points 789W

The additional costs of increasing basic state pension in 1998–99 by £5, £10 and £20 if contributory retirement pension (RP)

and linked benefits increase

1998–99 £5 increase £10 increase £20 increase Gross cost (£ million) 2,860 5,720 11,440 Income-related benefit offset (£ million) -750 -1,450 -2,710 Income tax offset (£ million) -190 -400 -830 National Insurance effects The Lower Earnings Limit would be increased to £69 £74 £84 The Upper Earnings Limit would be increased to £520 £560 £635

The additional costs of increasing basic state pension in 1998–99 by £5, £10 and £20 if contributory retirement pension (RP)

and linked benefits increase

1998–99 £5 increase £10 increase £20 increase To offset the increase in net costs: The employees' NIC rate would have to be increased by 0.5 percentage points 1.0 percentage points 2.3 percentage points The employers' NIC rate would have to be increased by 0.3 percentage points 0.6 percentage points 1.4 percentage points Notes:

1. All estimates are rounded to the nearest £10 million.

2. Gross costs were estimated by the Government Actuary's Department (GAD).

3. The effect on income tax revenues were estimated by Inland Revenue.

4. Means-tested benefit offsets were calculated using the 1995–96 Family Resources Survey and the May 1996 Income Support Quarterly Statistical Enquiry, both uprated to 1997–98 prices, benefits and earnings levels, and calibrated to the forecasts underlying the 1997 Departmental Report.

5. The lower earnings limit and the upper earnings limit are legally linked to the rate of basic State pension; The Class 2 and Class 3 rates are all tied to the basic State pension rate by convention. GAD have assumed that all these limits and rates will continue to be linked to the RP rate. Hence altering the basic State pension rate has an automatic knock-on effect on several aspects of the contributions system.

6. Inland Revenue are not able to estimate the effect of increasing the linked benefits on income tax revenues. The net costs of increasing contributory RP and the linked benefits have therefore been calculated by subtracting the estimated increase in income tax receipts from increasing contributory RP only from the net DSS costs of increasing contributory RP and the linked benefits.

7. Since income related benefits and income to tax revenues do not form part of the NI Fund, the revenue raised from increasing National Insurance Contribution rates on the basis shown will be insufficient to meet the extra expenditure falling on the Fund from the stated benefit increases.