Budget 2021: Sunak reveals changes to pension charge caps
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The Chancellor defended his U-turn on the Conservative party manifesto pledge. Giving evidence to MPs on the Treasury select committee this afternoon, Mr Sunak said it was “universally” acknowledged he could not honour the commitment in light of the pandemic.
At the 2019 general election, the Conservatives vowed to increase state pension payments each year by the highest out of inflation, average earnings, or 2.5 percent.
However, in September the Government said it was suspending the mechanism for the 2022-23 financial year.
It came after statistics indicated average earnings were due to rise by as much as nine percent due to thousands of Britons returning to work after being placed on the emergency furlough scheme during lockdowns.
“We had a situation where the statistics that determine earnings growth were completely distorted as a result of furlough, composition of the labour market before and after the pandemic, and the very rapid re-opening after a very rapid fall,” he told the committee.
“Everyone, universally, not political, acknowledges that the statistics were not objectively a sound basis to be making decisions on.
“That was not just me, that was – I’ve got a list here, I could read through them – multiple different organisations that all said the same.”
Payments are now due to rise in April by 3.1 percent, the rate of inflation in September this year.
A “double lock” suspending the earnings element was used to calculate the payments.
Mr Sunak said: “We had a decision. Do we go ahead and apply the triple lock, in a way that it was clearly not meant to be applied, and award people a number based on a number we know to be wrong and false?
“That would mean we would have to find that billions of pounds from somewhere else, or not spend on whether it’s the NHS, or schools, or something else.”
The select committee was the first time Mr Sunak has publicly spoken about the decision to break with the election promise.
“We didn’t scrap the triple lock in its entirety as some people said we should, just temporarily moved to a double lock,” he said defending his actions.
“I stand by that decision.”
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He added: “I genuinely believe that is the right and fair thing to do.”
The Treasury is expected to save £6billion next year after temporarily removing the triple lock.
The triple lock suspension comes despite fears pensioners face a gruelling winter.
Inflation is set to be as high as six percent by April next year, double the September figure used to calculate the state pension increase.
At the same time, energy bills are due to sky rocket with the price cap set to be significantly higher in the spring than it currently is.
The Government has vowed to help those struggling through the winter after unveiling a £500million winter hardship fund.
Money will be distributed through local councils who will be able to give extra support to those struggling with the cost of living crisis.
Ministers have vowed the state pension triple lock will be reimposed next year.
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