No one has benefited more from our encouragement of savings than pensioners. In the 1980s, most pensioners saw their real incomes rise sharply, as inflation fell and the value of occupational pensions rose. On average, pensioners' real incomes increased by more than a third between 1979 and 1988. More than half of pensioners now have a second pension; and pensioners have seen their income from saving double since 1979.
I propose that the income tax allowances for the over-65s—both the personal allowances and the married couple's allowances—should increase in line with inflation. The income limit for the age-related allowances will also increase in line with inflation.
Increases in the age allowances can, of course, benefit only those pensioners who pay tax. But this year I also want to help the less fortunate pensioners—those whose savings have been eroded over the years by inflation; those who have only modest occupational pensions; and those who retired too early to take advantage of the growth of SERPS.
Last October, my right hon. Friend the Secretary of State for Social Security announced that the income support rates for pensioners would be increased this April by at least 7 per cent.; and there were extra increases for disabled pensioners and the over-80s.
I now propose a further increase in income support rates, of £2 for single pensioners and £3 for pensioner couples. When this comes into effect, in October, all pensioners on income support will be at least £5·75 a week better off than they are now, and some will be as much as £10·70 a week better off. In total, some 5 million people will benefit. And it will bring the real increase in spending on benefits for poorer pensioners since 1989 to more than £700 million.
The cost—some £145 million in 1992–93 and £305 million in the following year—will be financed from within the existing public expenditure plans.