§ Mr. CorbynTo ask the Secretary of State for Social Security what would be the net cost to the Exchequer of raising the state pension in line with earnings in the current year over the pension payable in 1996–97; and what would be the net additional cost if the link between pensions and earnings had not been ended in 1980. [17364]
§ Mr. Denham[holding answer 25 November 1997]: The additional net cost to the Exchequer of raising State Pensions in line with earnings from April 1997 is estimated to be £530 million 1997–98.1
If the link between pensions and earnings had continued since 1979 to date the additional net cost to the Department in 1997–98 is estimated to be £11.4 billion2.
Notes:
1 Figure is rounded to £10 million.
2 Figure is rounded to nearest £100 million.
1. These estimates are in respect of contributory Retirement Pension and linked benefits. The gross costs were estimated by the Government Actuary's Department. Net costs were calculated by using income related benefit offset ratios.
2. The income related benefit offsets were calculated using specific offset ratios of 27 per cent. and 22 per cent. respectively. The offset ratios were calculated using two models: the 1997–98 Policy Simulation Model based on the 1995–96 Family Resources Survey, and the 1997–98 Income Support Simulation Model based on the 731W May 1996 Quarterly Statistical Enquiry; both uprated to 1997–98 prices, benefits and earnings levels, and calibrated to the forecasts underlying the 1997 Departmental Report.