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Saturday, Feb 22, 2025

Rishi Sunak hints at suspension to pension triple lock

Rishi Sunak hints at suspension to pension triple lock

Chancellor refuses to say whether guarantee introduced in 2010 will be honoured this year


Rishi Sunak has given a broad hint that the government will temporarily break the pension triple lock this year in order to prevent the Treasury being landed with a £3bn uprating bill.

The chancellor said there was a need to be fair to taxpayers as well as pensioners in light of a forecast from the Whitehall spending watchdog – the Office for Budget Responsibility – that a post-lockdown surge in pay growth would result in the state pension going up by 8% next April.

The government pledged at the 2019 election to continue raising the state pension in line with average earnings, the annual inflation rate or 2.5% – whichever is higher.

But in a series of radio and TV interviews, Sunak refused to say whether the guarantee would be honoured this year.

“The triple lock is the government’s policy but I very much recognise people’s concerns,” he told BBC Breakfast.

“I think they are completely legitimate and fair concerns to raise. We want to make sure the decisions we make and the systems we have are fair, both for pensioners and for taxpayers.”

The pension triple lock was introduced by the coalition government in 2010 but for months the Treasury has been lobbying behind the scenes for a temporary suspension.

The OBR has said earnings growth will be artificially high this year because growth is picking up and wages were depressed this time last year by the restrictions imposed on the economy to limit the spread of the coronavirus. The loss of many lower-paid jobs has also had an impact, because those remaining in work are paid more.

Annual earnings growth was running at 5.6% in the three months to April and is on a rising trend. If the government decides to leave the pledge in place, pensions will be uprated using the earnings figure for July.

Sunak said the government must “wait for the actual numbers to be finalised”, which he said were currently “speculation”, before looking at the policy “properly at the appropriate time”.

After a year in which government borrowing hit a record peacetime high of more than £300bn, the chancellor has repeatedly said it is important to return the public finances to a more sustainable path.

A decision to break a manifesto commitment would require the agreement of Boris Johnson, who is aware that the triple lock is popular with pensioners, the majority of whom vote Conservative.

Sunak will argue, however, that a one-year suspension is politically defensible given the unusual circumstances and the need to fund other government priorities, such as the NHS and catchup funds for schools.

Final decisions will be made in the autumn in the government’s spending round, which will be formally launched by the chancellor later this month.

David Willetts, the president of the Resolution Foundation thinktank, said it was time to abandon the triple lock permanently.

“The Covid crisis has laid bare the design faults of the triple lock, with a severe jobs crisis last year inadvertently contributing to an unnecessary and unjustified 8% rise in the state pension next year.

“The chancellor should take the opportunity this autumn to replace the triple lock with a smoothed earnings link. This would mean the state pension would rise in line with the living standards of working-age people – a change that would be fair to all generations.”

Johnson did not play down rumours of the triple lock’s imminent demise, echoing Sunak’s words that he wanted increases to be fair to the recipients and the wider pool of taxpayers. “We’ve got to have fairness for pensioners and the taxpayers, but I think you’ll have to wait and see what the chancellor comes up with,” the prime minister said.

His spokesperson said the triple lock remained government policy, adding that the government “recognises the concerns about what that might mean but the numbers remain speculation and it’s wrong to make policy about speculation”.

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