HC Deb 29 April 2004 vol 420 cc1244-5W
Mr. Webb

To ask the Secretary of State for Work and Pensions if he will estimate(a) the gross cost, (b) the saving in expenditure on the state second pension, (c) the saving in expenditure on pension credit, (d) the saving in expenditure on other means-tested benefits, (e) the additional revenue from income tax and (f) the net cost to the Exchequer, of paying a full basic state pension to all individuals aged 65 or over from April 2006 onwards at the rate of the guarantee credit, regardless of contribution record, and subsequently indexed to average earnings, combined with the abolition from that date of all new accruals to the state second pension and the abolition of all payments of savings credit, including those to existing recipients for each of the 10 financial years from 2006–07. [167320]

Malcolm Wicks

[holding answer 22 April 2004]: The information is not available in the format requested. However, such information as is available is in the following table:

£ billion
(a)

Gross

Cost

 (b)

S2P

Saving

 (c)

PC

Saving

 (d)

IRB

Saving

 (f)

Net

Cost
2006–07 19.4 0 3.1 1.6 14.8
2007–08 20.7 0 3.3 1.7 15.8
2008–09 22.1 0.1 3.5 1.8 16.7
2009–10 23.5 0.1 3.7 1.9 17.8
2010–11 25.0 0.2 3.9 2.0 18.8
2011–12 26.6 0.3 4.1 2.1 20.1
2012–13 28.6 0.4 4.3 2.3 21.6
2013–14 30.5 0.6 4.6 2.4 23.0
2014–15 32.4 0.7 4.8 2.6 24.3
2015–16 34.2 0.9 5.0 2.7 25.6

Notes:

  1. 1. Figures are for Great Britain in 2004–05 price terms using the GDP deflator index rounded to the nearest £100 million.
  2. 2. Gross costs are estimated by the Government Actuary's Department and are consistent with Budget 2004 assumptions and use 2002 based population projections. Gross costs refer to the additional costs after allowing for National Insurance Fund benefits and non-means tested vote benefits.
  3. 3. The net cost includes all savings except for additional income tax revenue, see note 4.
  4. 4. Additional income tax revenue is estimated by the Inland Revenue using 2006 tax rates. We are unable to publish any income tax forecast estimates for years beyond that which is published in the Financial Statement and Budget Report (currently 2006–07). The income tax estimate for 2006–07 is based on the 2001–02 Survey of Personal Incomes and is projected in line
    5. 1245W
  5. with March 2004 Budget assumptions. The income tax revenue in 2006–07 is £5.4 billion, resulting in a total net cost of £9.4 billion. For illustrative purposes, Inland Revenue assumed income tax revenue to be a fixed percentage of the gross cost for this option in 2007–08 and 2008–09. Therefore, the total net cost in 2007–08 is £10 billion and in 2008–09 is £10.5 billion. Estimates for later years would be subject to a greater degree of uncertainty.
  6. 5. The savings from abolishing future accruals to the state second pension are also calculated by the Government Actuary's Department, they include state pension, additional pension and widows benefit additional pension and are consistent with the long term Public Expenditure Survey forecasts. As earnings in the year of reaching state pension age do not count towards an individual's S2P, the first savings occur in 2007–08. No allowance has been made for changes to contracting out rules.
  7. 6. The savings credit is assumed to be abolished from April 2006 with no payments to existing pensioners and no new recipients after 2006. Figures are based on the illustrative long-term projections of benefit expenditure underlying Annex A of the Budget report.
  8. 7. The savings from other income related benefits (housing benefit and council tax benefit) are calculated using the Department's policy simulation model and April 2004 benefit rates. Consistent with previous answers the offset for the first year is held constant for subsequent years. In addition the increase in housing benefit and council tax benefit personal allowance for people aged 65 and over by the maximum savings credit amount, introduced alongside savings credit and included in forecast expenditure, has been accounted for, with the costing including the effect of removing this increase.