A spokesperson for the prime minister has vowed the government will not ditch the “triple lock” pension pledge, despite its £4bn price tag.
Downing Street insisted that the pledge – part of the Conservative party manifesto in 2019 – will not be broken, after reports that government ministers were considering a temporary suspension to the plan in an effort to cut spending after Covid-19.
“We have made a commitment on triple lock and plan to stick to that commitment,” the spokesperson told the Downing Street lobby briefing.
Pressed on whether the government was dismissing any temporary suspension to the pledge, he repeated: “We are committed to the triple lock.”
The headline growth rate of average UK earnings rose to 5.6 per cent in April — an artificial inflation caused by last year’s furlough scheme and job losses. Economists expect it to rise to around 8 per cent by July, but say the true rate of growth is much lower.
Sunak will have to hike pensions by the headline rate if he is going to stick to the Tories’ triple lock promise, which ensures that state pensions rise by the highest out of average earnings growth, inflation or 2.5 per cent. This equates to an extra £4bn annual cost for future pensions.
The Treasury appeared to accept the difficulty of its position last week, telling the Financial Times its focus was to “ensure fairness for both pensioners and taxpayers”.
Forecasts from the The National Institute of Economic and Social Research align with the triple lock estimates, and suggest the government may need to spend up to an extra £4bn per year to keep pensioners’ living standards in line with those of working adults.