One of Boris Johnson’s most politically sensitive election pledges could be at risk in the wake of the economic fallout of the coronavirus.
Government officials are aware that the pensions “triple lock,” promised by the last three Conservative prime ministers, may have to be reviewed if it becomes unaffordable, a person familiar with the matter said.
A Treasury official denied that any decision had been taken, and rejected suggestions that Chancellor of the Exchequer Rishi Sunak was preparing to drop the promise.
But the virus has left a question mark over the guarantee to raise the state pension every year by the annual growth in average earnings, inflation, or 2.5% — whichever is highest.
That stems from the effect, first highlighted a week ago, that furloughing millions of workers and then returning them to work is expected to have on earnings. Some economists predict a drop this year followed by a rapid increase in 2021. That would mean the state pension, which already costs the government about 100 billion pounds ($126 billion) a year, having to rise substantially.
The pensions rise in question isn’t due until April 2022, so ministers have some time before they have to decide. Much also depends on how the figures turn out. The Bank of England’s illustrative scenario for earnings sees them fall 2% in 2020 and then rise 4% in 2021, an increase that isn’t far off the minimum required under the triple lock.
The Treasury said in a statement: “Announcements on tax and pension policy are for budgets. The government is committed to supporting pensioners.”