Chancellor Rishi Sunak has signalled that the triple lock on pensions could be broken amid concerns state pensions may rise by 8% because of the coronavirus pandemic.
He said concerns surrounding the large and costly rise are “completely legitimate” and that any decision will be fair for “pensioners and for taxpayers”.
The Office for Budget Responsibility (OBR) predicted a rise of up to 8% from April next year, which could cost an extra £3 billion in Government spending.
Mr Sunak declined to rule out an alteration to the Conservative manifesto pledge to maintain the triple lock on pensions, instead only noting that it is policy at the moment.
We want to make sure the decisions we make and the systems we have are fair, both for pensioners and for taxpayers
Chancellor Rishi Sunak
“The triple lock is the Government’s policy but I very much recognise people’s concerns,” he told BBC Breakfast.
“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.”
Mr Sunak said the Government must “wait for the actual numbers to be finalised”, which he said are currently “speculation”, before looking at the policy “properly at the appropriate time”.
The Chancellor’s words were echoed by Prime Minster Boris Johnson who told reporters: “I think we have got to have fairness for pensioners and the taxpayers.”
The triple lock guarantees that the state pension increases in line with inflation, earnings or 2.5% – whichever is higher.
But unusually strong recent rises in earnings as a result of the pandemic mean the payout is expected to sharply increase.
This is as a result of artificially high earnings growth when comparing with a year ago when wages were depressed while many workers were furloughed. Many jobs lost have also been lower-paid roles.
The Chancellor should take the opportunity this autumn to replace the triple lock with a smoothed earnings link
Lord Willetts, Resolution Foundation
Lord Willetts, president of the Resolution Foundation think tank, said: “The Covid crisis has laid bare the design faults of the triple lock, with a severe jobs crisis last year inadvertently contributing to an unnecessary and unjustified 8% rise in the state pension next year.
“The Chancellor should take the opportunity this autumn to replace the triple lock with a smoothed earnings link. This would mean the state pension would rise in line with the living standards of working age people – a change that would be fair to all generations.”
Meanwhile, Mr Sunak defended the decision to end the £20 weekly uplift to Universal Credit which was introduced during the pandemic.
“I think people understand what’s right for a crisis, and what’s meant to be temporary obviously is different when we get through that,” he told Times Radio.
Critics of the move say it will heap fresh pressure on to struggling families and the most vulnerable in society.