UK

Rishi Sunak is set to AXE pension triple lock as wage rises put extra strain on public spending 

Rishi Sunak is set to AXE pension triple lock as wage rises put extra strain on public spending

  • Sunak risks political backlash as he will break a manifesto pledge to increase state pension in line with the higher of wage growth, inflation or 2.5 per cent
  • Figures showed wages climbing by 8.8 per cent in the three months to June
  • If state pensions were to rise by this amount, the cost of pensions to the Treasury would rise by £8billion 

Rishi Sunak is set to axe the pensions triple lock as a huge rise in wages threatens to add billions to public spending.

The Chancellor risks a political backlash as he prepares to break a manifesto pledge to increase the state pension in line with the higher of wage growth, inflation or 2.5 per cent.

Office for National Statistics figures yesterday showed wages climbing by a massive 8.8 per cent in the three months to June, compared to the same time a year earlier. 

If pensions were to rise by this amount, anyone on the full state benefit would see their weekly payments rise from £179.60 this year to £195.40 next, giving them £822 more in total over the course of the year.

Rishi Sunak is set to axe the pensions triple lock as a huge rise in wages threatens to add billions to public spending

Official figures showed total pay including bonuses rose by 8.8 per cent in the three months to June, while regular pay was up 7.4 per cent

Official figures showed total pay including bonuses rose by 8.8 per cent in the three months to June, while regular pay was up 7.4 per cent

This would ramp up the cost of pensions to the Treasury by a staggering £8billion, according to calculations from wealth manager Quilter. This is £5.7billion more than if pensions rose by 2.5 per cent.

The rise in wages compared to a year ago is because many workers last year were on furlough or had hours reduced so saw weekly wages fall.

As a result, the Mail understands Mr Sunak is set to suspend the triple lock for at least a year, fiddling wage growth figures to iron out the effects of the pandemic.

But ditching traditional metrics would cost pensioners – anyone turning 66 this year would be nearly £12,000 worse off than they would have been by the age of 85 – if pensions instead climbed by 2.5 per cent each year. Such a shift is likely to be met with anger by pensioners as well as backbench Tory MPs.

But it is understood the Chancellor is concerned he will have trouble justifying other tough decisions he faces over the next six months if he goes ahead with a generous hike to the state pension.

The Chancellor risks a political backlash as he prepares to break a manifesto pledge to increase the state pension in line with the higher of wage growth, inflation or 2.5 per cent

The Chancellor risks a political backlash as he prepares to break a manifesto pledge to increase the state pension in line with the higher of wage growth, inflation or 2.5 per cent

As job vacancies hit 1m, staff chaos sees Nando’s run out of chicken 

Job vacancies have hit a record high as firms cry out for staff – while Nando’s says it will lend employees to suppliers to deal with a shortage of chicken.

The number of empty positions soared above one million for the first time last month, according to data from the Office for National Statistics.

It comes as firms across the country have complained of being unable to recruit enough staff, as some remain on furlough and others are still being told to isolate by the NHS Covid app.

A tenth of Nando’s restaurants – 45 outlets – have temporarily closed due to shortages in the supply chain.

Nando’s said it was due to a lack of staff at its suppliers’ factories and it will lend some of its team to help. It said: ‘We are doing everything we can to get the peri-peri back… on your plates’.

Some companies are offering vast pay rises to attract employees – meaning prices in restaurants, shops and pubs could also soon increase. Theatres, cinemas and entertainment businesses saw vacancies rise by 23,000, or 267 per cent, from May to July, compared to the previous three months.

The largest overall increase was in the accommodation and food services sector, where vacancies shot up by 73,000, or 164 per cent.

Jennifer Beckwith, of the Confederation of British Industry, said: ‘Employers are concerned that staff shortages are stalling their ability to grow.’

The Treasury will need to spend £10billion more on transport, education and the NHS over the next three years to combat the Covid hangover, according to the Government’s Budget watchdog – money which will have to be raised by cuts or tax rises. 

Julian Jessop, economics fellow at the Institute of Economic Affairs think-tank, said: ‘Each one percentage-point increase in earnings growth will add around £900million to annual spending on state pensions, next year and in future years. 

‘The pay data have been distorted by the pandemic in ways that no one could have anticipated. 

‘Unless the triple lock is changed, this will provide an unintended windfall to pensioners that is increasingly hard to justify.’ 

Mr Sunak is likely to argue that distortions to earning figures caused by Covid make it impossible to deliver on the triple lock, a 2019 Tory manifesto pledge.

Former pensions minister Steve Webb said: ‘This is ultimately a political judgment for the Government, but the most likely option remains to look for a measure of earnings growth which strips out the effect of the pandemic.

‘This could save the chancellor several billion pounds a year whilst still allowing him to claim he had kept to the ‘spirit’ of the triple lock promise.’ 

However, such a move is fraught with difficulty and government insiders fear a potential backlash from older voters. 

Ian Browne, a pensions expert at Quilter, said: ‘The triple lock is a ticking time bomb for the Chancellor, and time is quickly running out for Sunak to make one of the most contentious spending decisions of a generation.

‘Does he risk jeopardising the grey vote by tweaking or scrapping the lock to save a pretty penny, or does he hold fast on the lock and give pensioners a seismic boost to their income despite the controversial cost? Sunak will have to decide whether to cut the red wire or the blue wire, but so far he has just stalled.’

It would not be the first manifesto promise Mr Sunak has broken. He is set to break the tax triple lock by increasing National Insurance to pay for social care, and has already scrapped the party’s commitment on foreign aid.

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