Chancellor of the Exchequer Rishi Sunak is facing some hard decisions ahead of the Autumn budget, as the Office for Budget Responsibility (OBR) has projected an 8% rise to the state pension next year, which could cost HM Treasury an extra £3bn ($4.1bn, €3.5bn) per year.
The state pension rises every year according to the triple lock; either by average earnings growth, the consumer price index (CPI) or 2.5%.
The 8% rise is being driven by earnings growth, which the OBR attributes to wages being “artificially high” this year following a dip in 2020 brought by the national lockdown.
Rock and a hard place
This puts the Conservatives is a tricky spot as maintaining the triple lock is part of their manifesto.
It has been under debate for some time but the 8% expected increase has pushed the issue to the top of the priority pile.
Sunak already has a lot on his plate when it comes to balancing the nation’s books, with the UK government facing the biggest economic bill since World War II – which currently stands at more than £300bn.
He either has to stump up the cash – which the country can’t afford – or break the triple lock – and risk upsetting voters up and down the country.
But he may have pulled a rabbit out of his hat with suggestions on Thursday that rather than scrapping the triple lock altogether, he might hit the pause button.
He told BBC Breakfast: “The triple lock is the government’s policy, but I very much recognise people’s concerns. I think they are completely legitimate and fair concerns to raise. We want to make sure the decisions we make and the systems we have are fair, both for pensioners and for taxpayers.”
But he added the government must “wait for the actual numbers to be finalised”.
Playing for time
With no concrete details about what a potential pause could look like – and no guarantee that the chancellor is seriously considering it as an option – it’s difficult to gauge what impact it could have.
The triple lock has long been a bone of contention and subsequent governments have wrestled with the financial burden and political hot potato.
So it may be too soon to say it’s the end of the road for guaranteed annual increases to the state pension.
But if Sunak can find a way to avoid committing an extra £3bn per year while not breaking the party’s manifesto – it seems like an obvious solution.
His appearance on breakfast television this morning could be the chancellor testing the waters to see what type of response the policy shift could get from rival political parties and the electorate.
Let us know in the comments below your thoughts – would suspending the annual increase be a good move for the public purse? Or is it the first step on the path to scrapping the triple lock altogether?
