By David Wilcock, Whitehall correspondent for Mailonline and Daniel Martin Policy editor for The Daily Mail
Rishi Sunak may be on the verge of ending a Conservative manifesto pledge to continue raising the state pension as he seeks to repair the economy battered by coronaviruses.
The Chancellor is reportedly considering breaking the so-called triple lock that links annual increases in payment – currently £ 134.25 a week – to the highest inflation rate, average earnings or 2.5%.
Such a decision would prove very controversial because it has been a pillar of conservative manifestos for years.
It could also be embarrassing for Boris Johnson, because just last month the Prime Minister promised that he would be kept, saying, “We will honor all of our manifesto commitments.”
However, Treasury officials have told the Financial Times that the collateral could become unaffordable due to wild fluctuations in average incomes following the coronavirus pandemic.
Official forecasts indicate that wages may skyrocket in 2021 as they rebound from an artificial decline brought about by the government’s job retention program.
Some 9 million people currently receive 80% of their salary through the leave scheme.
The Chancellor is reportedly considering breaking the so-called triple lock that links payment increases to the highest in annual inflation, average earnings or 2.5%.
Such a move would prove to be highly controversial as it has been a mainstay of conservative manifestos for years
Last night, the Treasury said that no decision had been made on the future of the pension guarantee.
While April 2021 pension payments would not be affected by this year’s wage decline – due to the minimum annual increase of 2.5% – the Treasury would find itself paying very large increases to retirees l ‘following year, on the basis of a strong expected recovery in wages when the leave plan ends.
Next year’s earnings from 2020 may well increase dramatically if many people go from 80% of salary on leave to 100% of salary.
The Financial Times said forecasts of large swings in average earnings have persuaded some in the Treasury that the triple lock should be suspended for at least two years: calculations to fix the increase in state pensions for April 2022 are based on average salary increases in the calendar year to September 2021.
But Boris Johnson told Sunak that any new formula for improving the state pension should include guarantees for retirees, officials close to the talks said.
Number 10 and the Treasury said in a joint statement: “The announcements on fiscal and pension policy are for budgets. The government is committed to supporting retirees. “
Paul Johnson, director of the Institute for Fiscal Studies, said the government is expected to announce the suspension of the triple lock soon.
“Next year’s earnings from 2020 may well increase enormously if many people go from 80% of wages on leave to 100% of wages or if many low-paid jobs are lost,” he said.
Torsten Bell, director of the Resolution Foundation, said it was “inevitable” that the Treasury should suspend the triple lock system and fix increases in pension rates for the next two years.
The Treasury has long wanted to abandon politics in the face of an aging society with a rapid increase in the number of retirees over the next two decades.
In the 2018 budget sustainability report from the Office for Budget Responsibility, the official responsible for budget oversight stated that the long-term cost of triple locking would be 1% of national income per year by 2068, which is equivalent to £ 20 billion a year at today’s prices.
The expected rupture of the triple lock, which was introduced by David Cameron’s coalition government in 2010, would open up a big debate over whether it is affordable in the long run.