HC Deb 13 November 2003 vol 413 cc440-1W
Mr. MacDougall

To ask the Secretary of State for Work and Pensions what assessment the Government have made of(a) the long-term cost of linking the basic state pension to earnings and (b) the effect on the incomes of the poorest pensioners if such a link replaced Pension Credit. [137448]

Malcolm Wicks

We estimate that introducing an earnings link in the basic State Pension from 2004–05 would cost around £600 million net in 2003–04 prices, rising to an extra £4.1 billion by 2010, £11.9 billion by 2020 and £25.0 billion by 2030 in today's prices.

If we were to scrap Pension Credit in favour of an earnings link, but retain the income guarantee level, the poorest pensioners would lose an average of around £400 a year in Pension Credit and the very poorest would gain nothing.

Mr. Webb

To ask the Secretary of State for Work and Pensions pursuant to the answer of 6 November 2003,Official Report, column 806W, on pensions, if he will estimate (a) the gross cost and (b) the cost net of savings on means tested benefits and increased income tax revenues of a combined policy of age additions to the basic state pension of (i) £10 per week at 75 and (ii) a further £5 a week at 80 from April 2004. [138464]

Malcolm Wicks

The estimated gross cost and the cost net of savings on means tested benefits and increased income tax revenues of a combined policy of age additions to the basic state pension of £10 per week at 75 and a further £5 a week at 80 from April 2004 are set out in the following table:

£ billion
Gross cost 3.0
Net cost 1.8

Notes:

1. Options (i) and (ii) have been costed jointly.

2. Figures are in 2003–04 price terms and are rounded to the nearest £100 million.

3. Gross costs are estimated by the Government Actuary's Department.

4. Income-related benefit offsets are calculated using the DWP policy simulation model.

5. Income tax revenue increases calculated by the Inland Revenue using the 2000–01 Survey of Personal Incomes and April 2003 Budget forecasts.

6. The age addition increases are assumed to be flat-rate increases and are paid in full to all pensioners of applicable age.