Rising wages are pushing up the share of public spending the UK government has to reserve for the state pension, forcing Rishi Sunak into a tight political corner. Before the next election he will have to decide whether to continue to prioritise the elderly over working age voters, or end his party’s longstanding commitment to a pensions ratchet the Treasury can no longer afford. Under the triple lock – a central plank of Conservative manifestos since 2011 – the state pension must rise by the highest of annual CPI inflation, average earnings or 2.5 per cent. New figures show earnings rising at an annualised rate of 8.5 per cent including bonuses in the three months to July, leaving Jeremy Hunt, the chancellor, little room for manoeuvre.
Hunt is expected to try to limit the pension increase to 7.8 per cent – in line with wages excluding bonuses – but even that will cost £103 billion or more than a tenth of total state spending, and is unlikely to satisfy pensioners who feel they’ve been stiffed. One option for Hunt and Sunak is to pay up this time, remove the triple lock from their manifesto, take the political hit and spend their opposition years telling younger voters whose side they’re on. Another would be to return to the EU single market and free movement, easing pressure on wages and thus pensions. That logic may yet take hold… deep into Sunak’s dotage.
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