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Welfare Reform Proposals and Incapacity Benefit

Lord Ashley of Stoke asked Her Majesty's Government:

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): The proposed modernisation of incapacity benefit for new claimants, with reformed contribution conditions and the taking into account of 50 per cent. of amounts of occupational and personal pensions over £50 a week, will reduce benefit expenditure. It is estimated that it will be reduced by £70 million in the first year (£45 million due to occupational pensions and £25 million to contribution conditions), £255 million in the third year (£190 million due to occupational pensions and £60 million to contribution conditions) and £700 million per year after 10 years (£550 million due to occupational pensions and £150 million to contribution conditions). Notes: 1. Figures may not sum due to rounding. 2. Savings from taking account of occupational and personal pensions allow for overlap with savings from reformed contribution conditions. 3. 10-year figures are rounded to the nearest £50 million, which reflects the greater degree of uncertainty in the longer term.

Lord Ashley of Stoke asked Her Majesty's Government:

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Baroness Hollis of Heigham: No existing incapacity benefit claimants will be affected by this measure.

It is estimated that the number of new claimants affected will be 35,000 in the first year, 120,000 in the third year and 300,000 after 10 years.

It is estimated that fewer than 15 per cent. of the affected cases will receive no incapacity benefit as a result of this measure. The vast majority of these will be in the top 40 per cent of the household income distribution, but the available data do not enable an exact proportion to be calculated.

Lord Ashley of Stoke asked Her Majesty's Government:

    What percentage of incapacity benefit recipients who are also receiving occupational pensions lie in each of the 7th, 8th, 9th and 10th deciles of the income distribution; what is the latest year for which these figures are available; and whether the income figures are adjusted for household size.[HL2527]

Baroness Hollis of Heigham: The information is in the table.

Percentage of Incapacity Benefit Recipients who are also in receipt of an Occupational Pension in the 7th, 8th, 9th and 10th Deciles of the Income Distribution

Income decilePercentage in decile (BHC)Percentage in decile (AHC)
71414
81415
9 and 101620

Source:

Households Below Average Incomes 1996-97.

Notes:

1. The 7th, 8th, 9th and 10th deciles here represent the top four income deciles.

2. Deciles 9 and 10 have been combined due to low sample sizes in the survey dataset.

3. BHC--Income deciles are calculated before adjusting for housing costs; AHC--Income deciles are calculated after adjusting for housing costs.

4. These figures are estimates for the latest year available, which was the financial year 1996-97. The data have been derived from the Department of Social Security's Households Below Average Income dataset, which in turn is based upon the Family Resources Survey for the same period.

5 The income figures are based on household income, adjusted for household size and composition. This reflects the commonsense notion that a household of five adults will need a higher income than a person living alone in order to enjoy the same standard of living. The process of adjusting income in this way is known as equivalisation and is needed in order to make sensible income comparisons between households. Each income decile contains 10 per cent. of the population of Great Britain.

6. The equivalence scales make allowance for factors such as household size and the age of any children but not for any extra costs that people with disabilities may have. Attendance Allowance and Disability Living Allowance, which are paid to help with the extra costs of disability, are included as income in these estimates. However, removing Attendance Allowance and Disability Living Allowance from individuals' income makes little difference to the figures reported here.

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Lord Ashley of Stoke asked Her Majesty's Government:

    What percentage of people on state retirement pensions who are also receiving occupational pensions lie in each of the 7th, 8th, 9th and 10th deciles of the income distribution.[HL2528]

Baroness Hollis of Heigham: The information is in the table.

Percentage of State Retirement Pension recipients who are also in receipt of an Occupational Pension in the 7th, 8th, 9th and 10th deciles of the income distribution

Income decilePercentage in decile (BHC)Percentage in decile (AHC)
7910
8710
978
1079

Source: Households Below Average Income 1996-97.

Notes:

1. The 7th, 8th, 9th and 10th deciles here represent the top four deciles.

2. BHC = Income deciles are calculated before adjusting for housing costs; AHC = Income deciles are calculated after adjusting for housing costs.

3. These figures are estimates for the latest year available, which was the financial year 1996-97. The data have been derived from the Department of Social Security's Households Below Average Income dataset, which in turn is based upon the Family Resources Survey for the same period.

4. The income figures are based on household income, adjusted for household size and composition. This reflects the commonsense notion that a household of five adults will need a higher income than a person living alone to enjoy the same standard of living. The process of adjusting income in this way is known as equivalisation and is needed in order to make sensible income comparisons between households. Each income decile contains 10 per cent. of the population of Great Britain.


Lord Ashley of Stoke asked Her Majesty's Government:

    What percentage of incapacity benefit recipients lie in each decile of the income distribution.[HL2529]

Baroness Hollis of Heigham: The information is in the table.

Percentage of Incapacity Benefit recipients in each decile of the Income Distribution

Income decilePercentage in decile (BHC)Percentage in decile (AHC)
bottom87
21213
31818
41614
51312
61010
799
888
9 and top89

Source: Households Below Average Income 1996-97. Notes: 1 Deciles 9 and 10 have been combined due to low sample sizes in the survey dataset. 2 Columns may not sum to 100 per cent. due to rounding. 3 BHC = Income deciles are calculated before adjusting for housing costs; AHC = Income deciles are calculated after adjusting for housing costs. 4 These figures are estimates for the latest year available, which was the financial year 1996-97. The data have been derived from the Department of Social Security's Households Below Average Income dataset, which in turn is based upon the Family Resources Survey for the same period. 5 The income figures are based on household income, adjusted for household size and composition. This reflects the commonsense notion that a household of five adults will need a higher income than a person living alone in order to enjoy the same standard of living. The process of adjusting income in this way is known as equivalisation and is needed in order to make sensible income comparisons between households. Each income decile contains 10 per cent. of the population of Great Britain. 6 Whilst incomes are adjusted for household size, and also for factors such as the age of any children, the current equivalence scales do not make any extra allowance for any extra costs that people with disabilities may have. 7 Other disability benefits, including Attendance Allowance and Disability Living Allowance (both components), are included in "income" in these estimates. Results have also been calculated after removing Disability Living Allowance (both components) and Attendance Allowance from individuals' income. This would reduce the proportion of incapacity benefit recipients in the top half of the income distribution by about 5 or 6 percentage points.


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Lord Ashley of Stoke asked Her Majesty's Government:

    What is the income level at the boundaries between the 6th and 7th; the 7th and 8th; the 8th and 9th; and the 9th and 10th deciles of the income distribution.[HL2531]

Baroness Hollis of Heigham: The information is in the table.

Money Values for Decile Breaks of the Equivalised Income Distribution in April 1998 prices (including self-employed) Net equivalised household income

60th Percentile70th Percentile80th Percentile90th Percentile
Before Housing Costs294341406521
After Housing Costs256299361464

Notes:

1. All figures are estimates and are taken from the Households Below Average Income (HBAI) data set, which is based on the Family Resources Survey (FRS). The FRS does not include Northern Ireland.

2. The income measure used is weekly net (disposable) equivalised household income (that is to say "actual" income that is adjusted to reflect the composition of the household). The figures given are equivalent to the "actual" household income of a couple with no children.

3. It is standard HBAI practice to give results for income both before and after housing costs, in order to allow for the effect of variations in housing costs between households.

4. It should be noted that deciles are numbered in ascending order relative to their position from the bottom of the income distribution. For example, the 7th decile would be the 7th decile from the bottom of the income distribution (and therefore the 3rd decile from the top of the distribution).

5. In the context of the above figures, a decile break is the boundary between consecutive deciles of the income distribution. For example, the 60th percentile represents the income level at the boundary between the 6th and 7th deciles, the 70th percentile the boundary between the 7th and 8th deciles and so on.

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