Will triple lock state pensions survive the current economic crisis?
The Covid-19 pandemic has dealt a crippling blow to the British economy.
In 2020 the predictions from the Office for Budget Responsibility said the country was on track to see the largest economic decline for 300 years, with output falling by at least 10% over 2020.
While the long-term economic outlook looked bleak in 2020, the various economic support measures announced by the government went some way to protecting it.
For instance, the job retention scheme, where the government paid the wages of 6.3 million people, prevented some of the fallout that would have been caused by large scale mass unemployment.
However, all this needs to be paid for.
For the first time in decades, government debt almost exceeds the size of the economy. Income from tax, National Insurance and VAT has plummeted while government spending has soared.
All this means that the state pensions triple lock has come under the microscope again.
Under the triple lock system, state pension payments rise by the higher of inflation, wages or 2.5% each year. This policy has been a central part of the government’s commitment to pensioners over the last ten years.
Recently, experts have been increasingly vocal in their opinion that the triple lock will have to be abandoned in order to pay for the fallout of the lockdown on top of the more recent cost of living increases and support provided.
The Social Market Foundation think tank has previously advised the government to scrap the triple lock system, and again more recently.
However, the triple lock pension scheme was a key part of both ex-Prime Minister’s Johnson & Truss’s manifesto & commitment.
Though new Prime Minister Rishi Sunak refuses to commit to the triple lock guarantee.
According to his spokesperson, the Prime Minister acknowledges some “uncertainty” about the state pension, which makes it “difficult for pensioners.”
Some Tory MPs have raised concerns the manifesto pledge could be broken again, arguing that pensioners need certainty that their income will rise in line with higher living costs.
As measured by the Consumer Prices Index (CPI), price inflation is currently at a 40-year high of 10.1%.
The Chancellor was expected to present his Budget on 31st October, but this ‘fiscal event’ has been delayed until 17th November, when it will be accompanied by independent economic forecasts from the Office for Budget Responsibility and an update on the Triple Lock position.
During Prime Minister’s Questions this week, Scottish National Party (SNP) leader Ian Blackford asked the Prime Minister if he would “reassure people and guarantee that benefits will rise in line with inflation in his upcoming Budget.”
Responding to the question, the Prime Minister said:
“My record on this is clear. Through the difficult times that we faced in this country through Covid, I always acted in a way to protect the most vulnerable.
“That’s because it is the right thing to do and those are the values of our compassionate party, and I can absolutely reassure him and give him that commitment that we will continue to act like that in the weeks ahead.”
Watch this space!