Rishi Sunak is mulling a suspension to the triple lock (Image: Getty)
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This comes after Prime Minister Boris Johnson reportedly agreed to a one percent rise in National Insurance. The rise of a penny in each pound is expected to raise £10billion which could be used to fund social care and the NHS backlog.
The increase in National Insurance contributions was broadly criticised for burdening working people with extra costs that don’t affect them.
This is because people normally stop paying National Insurance when they reach the state pension retirement age, which is currently 66.
Sunak should ‘step away’ from pension triple lock says Gauke
The triple lock guarantees annual state pension growth is tied to the highest of inflation, earnings growth or 2.5 percent.
This has created a disparity between pension growth and earnings growth as in recent years earnings growth has been extremely weak.
However, the Prime Minister will be reluctant to upset his electoral base, which sways heavily towards older demographics.
This is amply demonstrated by the fact that 67 percent of voters aged 70+ voted Conservative in 2019.
There are worries that if the triple lock is unlocked once it may be again (Image: Getty)
Furthermore, the retention of the triple lock was a Conservative Party manifesto pledge in 2019.
But concerns over generational unfairness and electoral pledges will have to be balanced.
The Office for Budget Responsibility (OBR) forecasted that as it currently stands, the triple lock means the state pension will rise by eight percent this year.
This will mean the Treasury will have to stump up an additional £3billion.
This is because of artificially high earnings growth this year after a slump last year, according to the OBR.
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The worry among economists and policymakers is that the triple lock policy is guaranteed to increase pension spending faster than any other area of government spending, which may cause it to eat up a higher proportion of the budget at the expense of other spending priorities.
For example, the end to the £20 a week uplift to Universal Credit which is to occur this Autumn was supported by the Prime Minister despite MPs’ arguments that it stay in place.
Mr Sunak also rejected a £15billion plan to invest fully in education and pay teachers more to work longer hours, leading to the resignation of the education recovery commissioner, Sir Kevan Collins.
This is partly because furloughed employees received only 80 percent of their salaries throughout the pandemic.
The OBR report said that every one percentage point increase to state pensions is associated with a £0.9billion rise in costs.
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Across a series of interviews, Rishi Sunak has strongly hinted at a triple lock suspension, but the reluctance to rule out a suspension entirely is certainly noteworthy.
Earlier this month he told the BBC’s Today programme “we will approach these decisions with fairness in mind for pensioners and taxpayers”.
He also said there are “some questions around the earnings numbers”, referring to the artificial growth in wages.
Last month, the Chancellor told GB News: “Of course that [the triple lock] is still Government policy.
“And if we look at what that specific policy has achieved, pensioner poverty is now far lower than it was when that policy was implemented when the policy was first introduced.”
Pressed on the future of the state pension triple lock, he continued: “
The PM has multiple concerns to balance but says we’ll have to have to “wait and see” (Image: Getty)
“I think formally, I have to be very careful, as I can’t comment on fiscal policy outside of events, which I’m sure you’ll understand.
“With regards to pensions uprating, there is a statutory review which is carried out later on in the year, which is then brought to Parliament.”
Elsewhere, speaking earlier this July, Mr Johnson said: “We’ve got to have fairness for pensioners and the taxpayers, but I think you’ll have to wait and see what the Chancellor comes up with.” Such rote language perhaps suggests they are waiting to formally announce a suspension to the triple lock, it’s been speculated.
Concerns over fairness are justified, but some may worry whether a one year suspension to the triple lock could then turn into two. And then three.