No10 hints state pension ‘triple lock’ WILL be watered down saying ministers must ensure ‘fairness’ amid fears Covid ‘warping’ of wage figures could mean 8 PER CENT hike this year
- Growing concern about a potential 8 per cent rise in the state pension this year
- Fears Covid effects warping wage figures will result in a massive cost for public
- Speculation that government could temporarily tweak the mechanism to lower
Downing Street today delivered another hint that the state pension triple lock could be watered down this year amid fears over Covid ‘warping’ of wage figures.
A spokesman for the PM said they ‘recognised people’s concerns’ about the prospect of the mechanism resulting in an 8 per cent rise – squeezing the public finances even further.
No10 stressed the government has to ensure ‘fairness for both taxpayers and pensioners’.
The comments came after Work and Pensions Secretary Therese Coffey raised eyebrows by saying ministers would be ‘driven by the data’ as to whether to make any changes.
The Tory manifesto committed to keeping the ‘triple lock’, which guarantees that the state pension rises by the highest out of inflation, earnings or 2.5 per cent.
However, there has been growing alarm at the potential scale of the increase this year amid the pandemic.
Economists say the effects of furlough and the pandemic are warping the figures, and average wage increases could reach 8 per cent by the quarter to July – which is used for setting the state pension
No10 stressed the government has to ensure ‘fairness for both taxpayers and pensioners’. Pictured, Boris Johnson and Rishi Sunak in Downing St
Economists say the effects of furlough and the pandemic are warping the figures, and average wage increases could reach 8 per cent by the quarter to July – which is used for setting the state pension. That would drive up costs for the Treasury by more than £3billion a year.
The PM’s spokesman said: ‘The Chancellor has said previously that the triple lock is government policy. But we recognise people’s concerns.
‘We’ve got to ensure fairness for both taxpayers an pensioners.’
Total wage growth excluding bonuses spiked to 6.6 per cent in the three months to May, according to the latest official data. Experts believe it will go even higher.
There has been speculation that the government might opt to take an average from the past three years.
The Office for National Statistics appeared to give the Chancellor a new option earlier this month by providing an estimate of ‘underlying’ wage growth
It said the true rate of earnings increases was probably between 3.2 per cent and 4.4 per cent.
Paul Johnson, head of the respected IFS think-tank, said the triple lock legislation ‘allows wiggle room over definition of earnings growth’ and using the ‘underlying’ measure would still be ‘generous’.
Treasury sources have insisted they will wait until the autumn to make a decision on the pension increase, while admitting this year will be an ‘anomaly’.