Downing Street on Monday vowed to “stick” to the government’s “triple lock” pledge for uprating the state pension, brushing aside Treasury concerns about how this could add £4bn to the annual cost of the policy.
Boris Johnson’s spokesman reiterated the commitment despite chancellor Rishi Sunak having questioned how the government could afford it given growing public spending pressures after the coronavirus pandemic.
Senior government figures have discussed a year-long suspension of the triple lock pledge, arguing ministers could cite unusual circumstances for breaking a promise contained in the Conservative party’s 2019 general election manifesto.
But the prime minister’s spokesman doubled down on the pledge on Monday, saying five times that the triple lock promise would be kept. “We have made a commitment on triple lock and plan to stick to that commitment,” he said.
Asked if he was ruling out a temporary suspension of the pledge, the spokesman replied: “Yeah . . . we are committed to the triple lock.”
Under the triple lock, the government must increase the state pension every year by the highest out of average UK earnings growth, inflation or 2.5 per cent. The earnings part of the pledge has been defined as the annual rise in the average earnings index in the quarter to July, which is known in early autumn.
Anomalies in wages data have pushed the headline growth rate of average UK earnings up to 5.6 per cent in the three months to April, with economists forecasting that it will rise to about 8 per cent by July. This could add up to £4bn to the annual cost of the triple lock pledge.
The Treasury has been keen to impress upon Downing Street that it could have to raise taxes or cut spending to find the extra £4bn for keeping the triple lock pledge this year, according to Sunak’s allies.
One alternative for the government might be ministers to define earnings growth in a different way than normal to adjust for the current distortions in the statistics.
This could enable ministers to say they were sticking to the triple lock pledge, while offering a lower increase in state pension, but one government insider said the move could be vulnerable to a legal challenge.
An aide to Sunak said no decision on the uprating of the state pension would be made until the earnings growth figure was known in September. The aide denied one media report that Sunak was considering changes to pension tax relief to help pay for the cost of the triple lock pledge.
Sir Steve Webb, partner at the pension consultants LCP and a former pensions minister, said the government “had a problem” because the default under the law was to uprate pensions in line with earnings.
Meanwhile, Downing Street and the Treasury have yet to reach agreement on funding Johnson’s pledge in 2019 to “fix the crisis in social care once and for all”.
Downing Street and the health department are pushing for an early government decision, perhaps even before the summer recess, to ensure a solution is in place before the general election, according to people briefed on the situation.
Johnson is believed to support a £50,000 cap on an individual’s lifetime liability for social care costs, combined with more generous means-testing: proposals that are broadly in line with reforms recommended by the economist Sir Andrew Dilnot a decade ago.
However, the Treasury is determined that additional funding is debated as part of the government’s spending review due to be concluded in the autumn.
One person briefed on the Treasury’s thinking said policy options were still at “the discussion stage”. No decisions had been made and none were “expected imminently”, added this person.
Richard Sloggett, former political adviser to health secretary Matt Hancock, said the spending review “is going to be critical. It allows the Treasury to say, if Number 10 wants social care reform, it has to not pursue something else”.
Leaders of seven organisations representing the social care sector, including the Social Care Institute for Excellence and the Association of Directors of Adult Social Services and Care England, on Monday wrote to Johnson, Sunak and Hancock “to urge the government to act now on reform of England’s social care system and publish its proposals before the summer [parliamentary] recess”.