Boris Johnson and Rishi Sunak at war over pension reform as chancellor plans to suspend triple lock protection to tackle £2TRILLION public debt
- The Chancellor wants to shelve pensions ‘triple-lock’ to help economic recovery
- Boris Johnson has pushed back because maintaining lock was manifesto pledge
- Fears that increase in average wages next year could create huge pension bill
- Mr Sunak believed to be looking at changes to capital gains tax and a tax on goods sold online
- Statistics show public sector debt is now above £2 trillion for the first time ever
Treasury plans to pause the pensions ‘triple lock’ to avoid a huge rise in costs have been pushed back by Boris Johnson over fears of a backlash from elderly voters, it has been reported.
Rishi Sunak is said to be concerned by the ‘anomaly’ of the mechanism used to calculate state pensions and is looking to either reform or scrap it in an autumn budget.
But the Chancellor has remained quiet on the matter in public because the guaranteed 2.5 per cent rise in savings has been a staple of Conservative manifestos since 2010.
Rishi Sunak is said to be concerned by the ‘anomaly’ of the mechanism used to calculate state pensions and is looking to either reform or scrap it in an autumn budget
In December, the party restated a commitment to raising the state pension in line with whichever was higher: wages, inflation or 2.5 per cent. They also ruled out rises in income tax, VAT or national insurance.
Mr Sunak has raised concerns that the bill for the triple lock will soar because of a fall in wages caused by the government’s furlough scheme, which covers 80 per cent of wages, and the recession.
Once the scheme ends, average wages are forecast to increase sharply next year, leading to a jump in the state pension the following year.
A source told The Times that Mr Johnson ‘hates’ the idea of a pause because he committed to maintaining it during the 2019 election campaign.
The Office for National Statistics today revealed that public sector debt is now above £2 trillion for the first time ever
ONS data published earlier this month showed the UK had been harder hit in the first half of the year than any other G7 economy – with only Spain enduring a worse downturn
While Mr Johnson and Mr Sunak have differing views over the ‘triple lock’, a government source said that it had not descended into a ‘blazing row’ and discussions on the country’s finances were looking at several options
‘He really doesn’t want to do it. The optics are terrible for older voters.’
Such a move would prove beneficial for the Labour Party, who could accuse the Conservative of betraying some of their core voters.
A YouGov poll earlier this week found that the Conservatives had an eight-point lead of Labour in general, and a 24-point lead among over-65s.
An Ipsos MORI poll found that levels of concern over of pensions and benefits were at 1 per cent, their lowest since 1991.
What is the State Pension ‘triple lock’
If you are a man born before April 6, 1951, or a woman born before April 6, 1953, you can claim the basic State Pension, with a maximum of £134.25 per week.
If you were born later, you have to claim the new State Pension, with a maximum of £175.20 per week.
The triple lock was introduced in 2010 by the Conservative-Liberal Democrat coalition government.
Under current rules, the state pension is increased by the triple lock which is the highest of either earnings growth, price inflation or 2.5 per cent a year.
As inflation is low at the moment, a mere 0.5 per cent in May, the state pension is likely to be increased by a minimum of 2.5 per cent or earnings growth.
The idea behind it was to protect pensioners from meaningless increases in the state pension, such as the 75p a week rise in 2000, and to make sure their income was not eroded by the gradual increase in the cost of living.
But such a guarantee is very expensive for the Treasury, and is expected to cost £45 billion over the next 15 years.
Paul Johnson, director of the Institute for Fiscal Studies, said the the government needed to suspend the triple lock to avoid huge costs.
‘Earnings next year compared with 2020 could well go up enormously if lots of people move from 80 per cent pay on furlough to 100 per cent of pay or lots of low-paid jobs disappear,’ he added.
Sir Steve Webb, who was pensions minister under the Coalition government, said that Rishi Sunak will find reviewing the costly pledge ‘irresistible’.
Mr Sunak is under pressure to find bring public finances back under control after national debt rose above £2 trillion for the first time.
He said the milestone stood as ‘a stark reminder that we must return our public finances to a sustainable footing over time, which will require difficult decisions’.
While Mr Johnson and Mr Sunak have differing views over the ‘triple lock’, a government source said that it had not descended into a ‘blazing row’ and discussions on the country’s finances were looking at several options.
Mr Sunak is considering a new tax on goods sold online amid concern over the collapse of the high street.
He has ordered a review of capital gains tax, in which the Treasury could claw back billions from homeowners and investors.
Officials are also said to be considering ‘stealth’ taxes, such as cutting pensions tax relief for high earners from 40 per cent to 20 per cent, which could raise £10 billion a year.
No 10 and the Treasury have previously said: ‘Announcements on tax and pensions policy are for Budgets. The government is committed to supporting pensioners.’