§ Mr. McMasterTo ask the Secretary of State for Social Security what would be the current value in real terms of the state retirement pension for(a) single pensioners and (b) married couples if it had been uprated in line with prices or incomes, whichever was the higher; what would be the value in current value in real terms of the Christmas bonus to (a) single pensioners and (b) married couples on the same basis for the same period; what would be the cost of restoring the link between pensions and incomes or prices, whichever was the higher, during the current financial year expressed as a weekly amount of national insurance contributions to an employee on average earnings and his or her employer; what is the amount of weekly average earnings on which this figure is based; what would be the cost of restoring the link based on the whole burden of retirement pensions being transferred to taxation expressed as a percentage increase in general taxation; and if he will make a statement. [39321]
§ Mr. HealdIt is estimated that the weekly rate of category A basic retirement pension would be £79.45 from April 1995 and the combined rate of category A and category B basic retirement pension payable to a couple would be £127.15 if the rates had been increased in line with the higher of earnings of prices since 1980.1
It is estimated that the Christmas bonus would be £28.80 if it had been increased in line with the higher of earnings or prices since 1980.1
Expenditure on retirement pension and linked benefits for those over state pension age would, as a result of restoring the link between pensions and the higher of incomes or prices, be increased by an estimated £9.8 billion in the 1995–96 financial year.2
649WThe increase in national insurance contributions to support this would result in an extra weekly cost of £8.45 to an employee on male average earnings and an extra £7.92 for his employer.
Male average earnings of £377 at April 1995 have been used.
The whole burden of retirement pension is estimated as £41.2 billion; this is the current cost of retirement pensions and linked benefits paid to people over state pension age, £31.4 billion, plus the extra cost of restoring the link, £9.8 billion. To raise £41.2 billion would mean increasing the basic rate of income tax from 25 per cent. to 47 per cent. If income-related benefits are taken into account, £38.5 billion would be transferred to taxation and the basic rate of income tax would increase to 45 per cent.
Notes:
1Estimates provided by Department of Social Security, Analytical Services Division-in each step of the calculation the benefits have been rounded to the nearest 5 pence.
The Retail Prices Index (all items) as published by the Central Statistical Office has been used for prices uprating.
Earnings upratings have been calculated on the basis of the Department for Education and Employment's Average Earnings Index (Whole economy unadjusted) as amalgamated in the Abstract of Statistics published by the Department of Social Security, Analytical Services Division.
2Estimate provided by the Government Actuary's Department based on benefit rates calculated as per note 1. The estimate includes the extra costs of Retirement Pension and linked benefits paid to people over State pension age in particular Widow's Benefit and Incapacity Benefit.