Triple Lock To Remain... For Now

The Treasury has confirmed that the Triple Lock will apply to State Pensions for 2023/24

In response to a written parliamentary question on Monday 20 June Simon Clarke, the Chief Secretary to the Treasury, confirmed that “Next year, the Triple Lock will apply for the State Pension. Subject to the Secretary of State’s review, pensions and other benefits will be uprated by this September’s CPI which, on current forecasts, is likely to be significantly higher than the forecast inflation rate for 2023/24.”

The Chief Secretary had been asked about further cost-of-living support for pensioners and his reply garnered several headlines, as if what he said was fresh news. In fact, his boss, the Chancellor, had said virtually the same thing in his May statement: “And I can reassure the House that next year, subject to the Secretary of State’s review, benefits will be uprated by this September’s CPI…which, on current forecasts, is likely to be significantly higher than the forecast inflation rate for next year. Similarly, the triple lock will apply for the state pension.” And, even before that, speaking in the House of Commons on 21 March, Secretary of State for Work and Pensions Thérèse Coffey had also committed to the State Pension Triple Lock being honoured for the remainder of this Parliament.

On current estimates, the September increase is likely to be around the current level of inflation (9.1% for May), not the ‘slightly above 11%’ mentioned by the Bank of England last week in its statement about the increase to base rate. Crucially that inflation figure is earmarked for October, when the next utility price cap is due to take effect. At present the Office for National Statistics has not decided how – if at all – the £400 support promised to all individual bill payers in the Chancellor’s statement will impact on inflation calculations.

Comment

The confirmation that inflation-linking will apply to State Pensions next April raises awkward questions for the Government (whichever shape or form that may be at the time).

The Government is reported to be planning to offer 2%-3% wage increases to public sector employees, in part justifying the lowly figure on the grounds that inflation-matching rises would themselves be inflationary.

However, the Treasury has not explained why 9%ish increases to all benefits will not have a similar inflationary effect. The additional money pumped into the economy will amount to about £24bn, of which roughly half goes on pensioner spending.

The potential widening gap between pensions and earnings growth also raises the thorny issue of intergenerational fairness.