§ Lord ABERDARE
asked Her Majesty's Government:
What would be the cost to the National Insurance Fund of providing a full pension to those 20,000 pensioners who currently receive a reduced pension or no pension because of the earnings rule and to show separately the estimated extra income tax revenue that would arise; and
What would be the cost to the National Insurance Fund over and above the £50 per week concession accepted by the Government of abolishing the earnings rule in 1977–78 assuming that the retirement condition was retained and to show the extra income tax revenue that would arise.
§ Lord WELLS-PESTELL
The Government do not consider that it would be possible to pay full pensions to those people whose pensions are reduced or extinguished by the present earnings rule without abolishing both the rule and the retirement condition. There were about 11,000 such pensioners in July 1975, and the amount of pension forgone by them is estimated to be £5 million a year at current benefit rates. After taking income tax into account the amount forgone is estimated at £4 million.
It is estimated that, at current rates of benefit, the cost to the National Insurance Fund in 1977–78 of abolishing the earnings rule and the retirement condition in April 1977 would be £45 million more than the cost of raising the earnings limit to £50a week. This extra cost would mainly arise from paying full pensions to people deferring their retirement. The estimated extra income tax revenue would be about £15 million at current rates of tax. There would be additional costs of about £15 million if the earnings rule also ceased to apply to the increases of retirement and invalidity pensions for adult dependants, but the tax yield from these additional payments would be small. However, as stated in the Public Expenditure White Paper (Cmnd. 6393), the Government will be proposing an amendment to the Social Security Act 1975 to provide that the earnings limit should not become £50 in April 1977 but that, after 995WA the increase to £35 a week in April 1976, it should go up in line with the movement of earnings.