Work and Pensions written question – answered on 4th May 2004.

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

To ask the Secretary of State for Work and Pensions if he will estimate the cost in each of the next 10 financial years from 2006–07, net of savings in means-tested benefits and additional income tax revenues, of paying from April 2006 a basic state pension to all single people aged 75 or above at the rate of the guarantee credit for single people regardless of contribution record, and a basic state pension to all couples where one or both partners is aged 75 or above at the rate of the guarantee credit for couples, with that pension being indexed to earnings in subsequent years, and assuming that the savings credit is abolished for those aged 75 or above.

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

The information is not available in the format requested. However such information as is available is in the table.

£ billion
(25)Net cost
2006–07 3.9
2007–08 4.2
2008–09 4.5
2009–10 4.8
2010–11 5.2
2011–12 5.6
2012–13 6.0
2013–14 6.4
2014–15 6.9
2015–16 7.4

(25) Before tax


1. The net cost includes all savings except for additional Income tax revenue, (see note 3). Figures are for Great Britain in 2004–05 price terms, using the GDP deflator index, rounded to the nearest £100 million.

2. Basic State Pension costs are estimated by the Government Actuary's Department and are consistent with Budget 2004 assumptions and use 2002 based population projections. Basic State Pension costs refer to the additional costs after allowing for consequential changes to National Insurance Fund benefits and non-means tested vote benefits.

3. Additional income tax revenue is estimated by the Inland Revenue using current tax rates. The Income tax estimate for 2006–07 is based on the 2001–02 Survey of Personal Incomes and is projected in line with March 2004 Budget assumptions. The cost net of income tax revenue in 2006–07 is £2.6 billion. For illustrative purposes, we have assumed income tax revenue to be a fixed percentage of the gross cost for this option in 2007–08 and 2008–09. Therefore, the illustrative total net cost in 2007–08 is £2.6 billion and in 2008–09 is £3.1 billion. Estimates for later years would be subject to a greater degree of uncertainty.

4. The State Second Pension is assumed to be unchanged.

5. The savings credit is abolished for those aged 75 from April 2006 with no payments to existing pensioners and no new recipients after 2006.

6. The savings from savings credit and other income related benefits (guarantee credit, housing benefit and council tax benefit) are calculated using the Department's policy simulation model for 2006–07. It is assumed that the proportion of savings calculated for the first year is constant for subsequent years.

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