Boris Johnson is under pressure to suspend his manifesto promise to maintain the “triple lock” for state pensions amid warnings that the system could land the taxpayer with a bill of up to £20bn.
The Treasury fears that a sudden spike in wages after the furlough scheme ends in October could result in a recommended pension rise of around 20 per cent from April 2022.
Economists and MPs have argued that such a large increase would be impossible to justify at a time when the United Kingdom is recovering from the coronavirus pandemic.
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Although the Government insists it remained committed to the triple lock, i understands that one option being considered is a suspension of one or two years to the system under which pensions rise by the highest out of the inflation rate, the increase in average earnings or 2.5 per cent.
State pensions lock in peril
A Whitehall source told i that ministers are considering ways of addressing a looming “statistical anomaly” over future pension increases.
“Wages look artificially depressed at the moment, but you could have a massive jump,” the source said.
“The risk is of the state pension jumping by 20 per cent in a year. That would obviously be difficult at a time when everyone is going through difficult times.”
A move to suspend the triple lock for one or two years could prove politically problematic for Mr Johnson given its inclusion in the Tories’ election-winning election manifesto.
But the Government could argue it is justifiable given the extraordinary circumstances and the unforeseeable economic crisis following the pandemic.
‘Things have moved on’
Prof Len Shackleton of the Institute of Economic Affairs, a free-market think tank, said: “Given the hit that young people are taking from the lockdown, I don’t think that asking pensioners to share the pain is outrageous.
He said: “Things have moved on – pensioner poverty is no longer the problem it used to be. The idea of some modification of this commitment won’t do any great harm.”
Labour MP Siobhain McDonagh, a member of the Treasury select committee, said: “There is a need to step back and take a look overall.”
She added that 44 per cent of welfare spending goes on the pension while young people are likely hardest hit by the economic damage caused by coronavirus.
A Downing Street source said: “These are unique and challenging economic circumstances and we cannot hide from that.
“Decisions on tax and pension policy are set out at Budget by the Chancellor but there are no plans to abolish the triple lock and we will always stand by pensioners.”
Asked if it could be suspended, the source replied: “I’m not going to speculate on what inflation might be in future.”
An announcement is not expected until Chancellor Rishi Sunak’s Budget in the autumn.
— to inews.co.uk