The triple-lock plan was met with skepticism by some in the government on Tuesday night.
A Whitehall source told The Daily Telegraph: “I think that sounds crazy. If you plan to stick to the inflation line, you need to show restraint everywhere.
“People will start to see the contradictions. If we limit ourselves to this gerontocracy, it obviously doesn’t have a very long life.”
David Davis, a former Tory secretary for Brexit, said: “We are not just facing inflation, we are facing stagflation, and the only way to beat every aspect of it is to promote high levels of growth in the private sector, which will lead to higher growth rates. productivity.
“While it is perfectly wise to protect the poor, the government must encourage growth.”
Jonathan Krieb, associate director of the Institute for Fiscal Research, said the policy was “unsustainable in the long run” and continued to put upward pressure on public finances “in a way that is almost unpredictable for the government.”
He added: “An inflation shock, such as one that reduces the value of real wages: tends to benefit both people on benefits whose incomes tend to rise in line with inflation and state retirees. This is a consequence of providing protection against inflation. “
Former Permanent Treasury Secretary Sir Nick McPherson tweeted: “If workers’ real wages have to fall, as HMG and the Bank of England say, it can only mean workers have to pay more taxes to fund their pensions. “
It is also unclear how increasing benefits in line with inflation, while warning against such wage increases, is helping to achieve the government’s public ambition to encourage more people to work.
A 10 per cent increase will add £ 18.50 a week to state pensions or £ 962 a year and increase the pension bill by around £ 10 billion.
For those receiving the full new state pension, their annual payments will be the highest of £ 10,000 for the first time or £ 21,000 for couples. This will cost the treasury around £ 10 billion.
The average figure for a 10 percent increase in benefits is difficult to calculate because it depends on the individual’s circumstances. But estimates suggest it could cost close to £ 10 billion.
What is the triple lock of pensions and how it works
By Tim Wallace
The triple pension lock was introduced in June 2010 by George Osborne in one of his first actions as Chancellor of the Coalition Government.
The policy ensures that the state pension increases every April with a higher value than consumer price inflation in the previous September, the annual increase in wages in the previous July or, if both are low, 2.5 percent. The idea was to keep pensions up to date with rising living costs.
“Retirees will have the income to live with dignity in retirement,” Mr Osbourne told Labor, mockingly that “there will be no more increases of 75pence on the basic state pension”.
The idea was that retirees’ incomes had been squeezed over time by inflation and the poor elderly needed a financial boost.
During the election campaign that same year, the Liberal Democrats argued that it was “unfair that retirees are falling behind with each passing year,” and called for a link between pensions and pay.
As a guarantee, there were fluctuations – in April this year, the increase was limited to a higher number between inflation or 2.5 percent, as distortions in Covid and the holiday scheme led to a suspension of pay by more than 8 percent.
As a result, the state pension increased by 3.1% in line with inflation last September.
This year the triple lock is back. Unless something dramatic happens to wages, which rose 6.8 percent in the three months to April, inflation will be at its highest.
The Bank of England expects prices to rise by at least 9.5 percent in the third quarter of the year, which includes September.
For someone with a full new state pension of £ 185.15 per week, this would be an increase to £ 203.67, or from just over £ 9,600 per year to almost £ 10,600 per year.
Rising inflation next year is also a big additional expense for the treasury.
The total state pension bill is expected to reach just over £ 110 billion this financial year. The 9.5% jump will lead to over £ 120 billion.
Benefits such as Universal Credit and child benefits rose 3.1% in April and can be expected to rise 9.5% next year – they are linked to inflation, but do not have the broader boost that pensions receive from the triple lock.
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