Triple lock depends on spending cuts, warns Hunt

Efficient public services and higher productivity are vital to support retirement provision, says Chancellor

BRITAIN’S pension triple lock can only be sustained with cuts to public sector spending and better economic growth, Jeremy Hunt has warned.

The Chancellor said the promise to keep the state pension rising by the highest of inflation, average earnings or 2.5pc every year depends on the success of plans to make public services run more efficiently.

Asked about the sustainability of the triple lock and the pension age, he said “both those things are kept under review.” Addressing the Lords’ economic affairs committee, Mr Hunt said: “The answer is very contingent on how successful we are. If we are able to run public services more efficiently, if we are able to increase our long-term growth rate, then it is entirely possible we can continue to have the levels of public provision we currently have, and the support for pensioners, and I very much hope that is the case.

“We are confident we can continue to support pensioners in the way we have been in the past.”

The state pension is due to rise by 8.5pc in April to £221.20 per week, as the payout increases in line with annual pay growth recorded in the three months to July last year.

That follows the 10.1pc increase last year, which reflected the blistering pace of inflation a year earlier.

Alongside other benefits including pension credit and the winter fuel payment, the triple lock means welfare spending on pensioners is to rise from £142bn this financial year to £171.8bn in 2028-29, according to the Office for Budget Responsibility (OBR).

The Government is on track to borrow £114.1bn this financial year, the OBR estimates, with the national debt of almost £2.7trillion forecast to rise to £3 trillion by 2028-29.

At the same time, the forecasters project a steady economic recovery with GDP growth accelerating from 0.3pc last year to 0.8pc this year and 1.9pc next year. Mr Hunt said: “The priority right now has to be, if we want to get the debt ratio down, to get back to our normal trend growth rate of about 2pc, where we haven’t been for the last couple of years.”

The Chancellor set out plans in his Budget earlier this month to bolster productivity in the NHS through investment in technology.

Yesterday, he told peers he plans to reduce the size of the Civil Service by 66,000 people, “which brings it to its pre-covid levels”.

Mr Hunt said: “A more productive workforce is a happier workforce and you can achieve big productivity improvements with natural wastage, not compulsory redundancies, but absolutely we need more productivity in the Civil Service.”

Meanwhile, he said the UK risks becoming dependent on “unlimited migration” with damaging effects on the economy and living standards.

He added: “The risk is that if you end up with a model that is dependent on unlimited migration, you end up undermining the growth in GDP per head and also creating a lot of social unrest.

“What I believe we should do is to say as a country that we are going to move decisively towards a high-skill, highwage economic model, which does not depend on unlimited migration.”

He declined to specify an “optimal” level for annual migration, but noted OBR predictions that numbers will come down from 672,000 in the latest 12-month figures to 315,000 per year in future. At the same time the Chancellor said he wants to get more adults into work and off benefits.

Mr Hunt said: “We need to keep looking at welfare reform. It is destructive to society if, inadvertently and for all the right reasons, a system ends up parking people outside the world of work.

“That is partly sickness, but it is also partly barriers like parents not being able to work because of the cost of childcare, older people coming to the view that they need to retire early – maybe in their 50s – because of the tax incentives around pensions.”

There are 9.25m people of working age who are classed as “economically inactive” by the Office for National Statistics as they are neither in work nor looking for work. This includes 2.7m on long-term sick, 1.1m who have taken early retirement and 2.6m students.