Downing Street has given its strongest signal yet that the triple pension lockdown will be watered down due to the recent increase in average incomes, which under current rules would result in an increase of more than 8% for retirees on the next year.
Boris Johnson spokesman said on Wednesday there were concerns about the link between rising state pensions and income.
“I think we recognize the legitimate concerns about potentially artificially inflated incomes impacting pension upgrades,” he said. “Any decision on future changes to the triple lockdown will be made at the appropriate time based on the latest data, and of course, we will continue to support the elderly, while ensuring that future decisions are fair with retirees and taxpayers. No decision has been made. “
The triple lock, which remains a commitment from the Tory manifesto, promises to pay either 2.5% or the rate of inflation or the level of pay recorded in July’s jobs figures – whichever is greater . Any suspension would be a victory for Chancellor Rishi Sunak, who lobbied the No.10 for a temporary rule change.
Johnson would have been reluctant to temporarily drop the pledge, given that retirees are a key Tory electoral base, but comments from the Prime Minister’s spokesman indicate that Sunak’s argument for fiscal discipline around pensions found an audience in Downing Street.
The Chancellor used an identical word form in his public statements on the triple lock, saying any settlement must be fair to “taxpayers and retirees”.
The Treasury did not budget an 8% increase in the state pension, and the chancellor warns other government spending priorities would suffer if it were to find an additional £ 4bn to increase with income .
Sunak is considering two alternatives to the triple lockdown, both of which would leave retirees an increase of around 3% next year. One would mean earnings would average over the past two years, with the sharp increase this year being offset by zero earnings growth in 2020, when many workers were put on leave.
A second option is to temporarily revert to the previous double foreclosure system in which this year’s state pension would increase by 2.5% or September’s inflation rate, whichever is higher.
The latest figures from the Office for National Statistics (ONS) showed the annual inflation rate fell from 2.5% to 2% in July, but economists believe the cut was a failure that should be more than reversed over the next few months.
The removal of restrictions as the lockdown eased last summer resulted in an unusual monthly price hike of 0.4% last July, but it has not been repeated this year. With a more normal pattern of discounts in July by clothing and footwear retailers, prices held steady last month.
ONS Deputy National Statistician for Economic Statistics Jonathan Athow said: “Inflation fell in July for a wide range of goods and services, including clothing, which declined with the return of sales of summer after the pandemic hit the area last year. This was offset by a sharp increase in the price of used cars amid increasing demand, following a shortage of new models.
“The different patterns of movement restrictions over the past two years have affected headline inflation. Part of this month’s decline is due to products and services, such as overseas travel, for which actual prices were used last year but had to be imputed this year.