The Chancellor of the Exchequer has kept his cards close to his chest when grilled on plans to revisit the pension triple lock in the upcoming budget.
At an evidence session yesterday, Rishi Sunak faced questions from Labour MP Mike Hill on whether it was acceptable to break manifesto commitments on the triple lock.
The chancellor stood firmly by his mantra of not being able to comment on “future fiscal policy”, one which he repeated multiple times throughout the committee session.
It comes amid predictions government interventions to help boost the UK’s job market could help spare the pensions triple lock, with average earnings growth likely to be less extreme over the next two years than originally expected.
The Office for Budget Responsibility (OBR) expects volatility of future earnings growth to be dampened due to government interventions, such as the Coronavirus Job Retention Scheme, helping to boost the job market.
It had previously suggested the UK’s economic lockdown could see average earnings crash by 7.3 per cent in 2020 before rebounding 18.3 per cent in 2021.
As the pensions triple lock is linked to earnings growth, this could have seen individuals’ state pension payments increase significantly, with the government having to foot the bill.
But in its latest fiscal sustainability report the OBR projected that average wages will increase by only 4.2 per cent in 2021.
Under current rules, the state pension is increased by the highest of earnings growth, price inflation, or 2.5 per cent a year.
In the OBR’s ‘central scenario’, the ‘triple-lock’ will boost the value of the state pension by 2.5 per cent for 2021 and then a further 5 per cent for 2022.
Based on OBR projections, by 2024/25 the triple lock will cost the exchequer £6bn more than if the state pension was to rise in line with CPI inflation.
Meanwhile, it will cost £3.2bn more in state pension spending than if it were linked to earnings and £1.8bn more than if there were a double lock system.